Industrial Production Drops 1.8%

By Tim Holland

The Federal Reserve this morning released its statistical report of Industrial Production and Capacity Utilization for the month of January 2009. The news, as anticipated, was not particularly encouraging as production fell 1.8 percent for the month.

The index is pegged to the year 2002 which, for reference purposes, is viewed as 100%. On that basis, industrial production is now running at a 101.3 percent of the 2002 average.

Consumer goods and construction continue to reflect severe weakness with further declines of 1.8% and 3.4% respectively. Matched against the 2002 index, those portions of the economy are now at 99.5% and 86.3%. The largest drops recorded for the month of January were in the business equipment sector and the already mentioned construction sector.

The business equipment drop was the largest since September 2008 when the change was 7.4% for the month.

With regard to industry groups, manufacturing recorded its third month in a row of over 2% declines. January’s drop of 2.5% was slightly better than the drop of 2.9% recorded for December.