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Manufacturing Continues Slump
-- November 15, 2002
Last year, a slumping manufacturing sector was the catalyst for the overall economy's descent into recession. Now, it's happening all over again.
Industrial production fell 0.8% in October -- it's largest decline since September 2001. It's now been falling for three straight months. Plus, capacity utilization fell to just 75.2%, hovering near two-decade lows. That means factories have nearly one-quarter of their machines sitting idle.
What's driving this slowdown in the manufacturing sector? Lack of demand by businesses and consumers. Production of business equipment plunged 2% because businesses aren't buying new computers, servers, desks, phones, etc. And business investment doesn't look as if it will improve any time soon. Companies are still facing an uncertain stock market, falling consumer demand, and tightened profit margins.
With consumer interest in auto deals now a thing of the past, auto production plummeted 5.2% in October. And, even though consumer sentiment rebounded slightly in November, don't count on demand for cars to rebound in the months ahead. Auto manufacturers have already dealt the zero-percent financing, no down-payment card, but consumers no longer want to play.
Factories Slow, but Consumer Spirits Rise