Saturday, February 16, 2002

Decline slows in factory output

By Jeannine Aversa
The Associated Press

        WASHINGTON — Industrial production dipped in January by just 0.1 percent, the smallest decline in six months, raising hopes that the nation's beleaguered manufacturing sector may be edging toward a recovery.

        The small decline in output at the nation's factories, mines and utilities followed a steeper 0.3 percent drop in December, the Federal Reserve reported Friday.

        “Can the long-awaited bottom in manufacturing finally be here?” economist Joel Naroff of Naroff Economic Advisors asked. “We may have finally gotten the signal we were looking for.”

        After decreases in 14 of the past 15 months, factory output was unchanged in January. A substantial rebound in steel production was one of the factors preventing another drop in manufacturing production, the Fed said.

        Furniture, industrial machinery and stone, clay and glass products also posted production gains, as did business equipment, computers and semiconductors.

        The Fed's report “can be added to the growing list of indicators that point to a possibility of a recovery in manufacturing early in 2002,” said National Association of Manufacturers President Jerry Jasinowski.

        The Institute for Supply Management reported stronger manufacturing activity in January, and government reports have shown that factories are seeing more demand for big-ticket goods. That's all promising news for the manufacturing sector, which has been mired in a 1 1/2-year-long slump.

        Another report showed that inflation at the wholesale level remains under control. The Labor Department said prices paid to factories, farms and other producers edged up 0.1 percent in January, after falling by 0.6 percent in December. Higher prices for gasoline, other energy products and food accounted for much of the advance.

        Excluding volatile energy and food prices, the “core” rate of inflation fell 0.1 percent in January after being flat in December, suggesting that most other prices were well-behaved.

        “There is no reason to worry about inflation,” Merrill Lynch economist Gerald Cohen said.

        For the 12 months ending Jan. 31, wholesale prices have fallen 2.6 percent, the biggest drop since 1950.

        Because of the tame inflation environment, the Federal Reserve was able to cut interest rates 11 times last year, in an effort to lift the economy out of recession.


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