Washington – Industrial output fell in January by the largest amount in 17 months, reflecting huge cutbacks at auto factories and weakness in housing-related industries.
The Federal Reserve reported Thursday that output at the nation’s factories, mines and utilities was down 0.5 percent in January, the biggest setback since Hurricane Katrina disrupted activity in the fall of 2005.
Half of last month’s decline reflected a drop of 6 percent in output at auto and auto-parts factories with smaller setbacks occurring in housing-related industries such as furniture, appliances and carpeting.
Overall, manufacturing fell by 0.7 percent, with analysts predicting continued weakness in coming months reflecting the problems in autos and the slumping housing industry.
“Automakers are working off a lot of unsold vehicles, and they can’t offer discounts as they have in years past because of their poor financial conditions,” said Mark Zandi, chief economist at Moody’s Economy.com.
In other economic news, the number of newly laid-off workers filing claims for unemployment benefits jumped by 44,000 to 357,000 last week. It was the largest one-week increase since September 2005 after Hurricane Katrina.
The Labor Department reported that the four-week moving average for claims rose to 326,250 last week, the highest level in nine weeks and an indication that conditions in the job market have softened.
Part of the increase in jobless claims last week was because of a blast of cold in the Midwest and Northeast, which triggered higher layoffs in such industries as construction.
Many analysts believe the unemployment rate, which edged up from 4.5 percent to 4.6 percent in January, will keep rising to perhaps 5 percent this year as the economy slows under the impact of previous credit-tightening by the Federal Reserve.
Fed Chairman Ben Bernanke, delivering the central bank’s latest economic forecast to Congress this week, indicated the Fed is likely to hold rates steady as the slowing economy lowers inflation pressures.
Many analysts believe the Fed is on the verge of achieving its hoped- for soft landing in which growth slows enough to lower inflation pressures without triggering a recession.
output at factories, mines and utilities, reflecting a 6 percent slide in auto and auto-parts production
0.7%
Overall drop in manufacturing in January
4.6%
Unemployment rate in January, up from 4.5 percent but still in low territory, amid a jump in new jobless-benefits claims
