Industrial output plunges, second big drop in 2 months

WASHINGTON - The nation's industrial output plunged in April, reflecting big cutbacks in autos and other manufacturing industries.

The Federal Reserve reported Thursday that industrial production dropped 0.7 percent last month, more than double the decline that economists had expected.

Manufacturing output fell by 0.8 percent with half of that weakness coming from large cutbacks in auto production which has been beset by falling demand for new cars and also problems related to a strike at a parts supplier for General Motors.

The drop in overall production matched a 0.7 percent decline in February and followed a weak 0.2 percent increase in March. The nation's industrial sector has been feeling the impact of the slowdown in the rest of the economy. A bright spot for manufacturing has been continued strong overseas demand, helped by a weak dollar which has boosted the competitiveness of U.S. products in foreign markets.

Output in the mining sector declined by 0.8 percent while output at the nation's utilities edged up by 0.3 percent last month.

The drop in overall production pushed the industrial operating rate to its lowest point in more than two years. The nation's factories, mines and utilities operated at 79.7 percent of capacity last month, the first time the operating rate has been below 80 percent since October 2005 when it stood at 79.8 percent because of disruptions from the Gulf Coast hurricanes.

In other economic news, the Labor Department reported Thursday that applications for jobless benefits rose by 6,000 last week to 371,000. The gain was in line with expectations.

The weak economy has triggered four straight months of job losses, often a sign that a recession has started. However, the April drop was just one-fourth the size of job losses in March, giving hope that the current economic slowdown may not be as severe as the past two recessions.

The increase of 6,000 claims applications last week was the smallest one-week move in about two months. Claims have been unusually volatile in recent weeks, reflecting strike-related layoffs in the auto industry and trouble the government had in seasonally adjusting the data to take into account an unusually early Easter.

For the week ending May 3, the total number of people receiving unemployment benefits rose by 28,000 to 3.06 million, the third straight week that this figure has been above 3 million, another sign that the weak economy is having an adverse effect on the labor market.

The number of states and territories reporting increases in claims applications for the week of May 3 totaled 26, while 27 saw decreasing claims.

New York was the state with the biggest rise in claims, a jump of 11,414 that was attributed to higher layoffs in transportation and service industries, followed by Pennsylvania, which saw an increase of 2,716.

Massachusetts had the biggest drop in claims, a decline of 5,027, which was attributed to fewer layoffs in transportation and services. Other states seeing big declines were New Jersey, down 3,259, and Georgia, with a drop of 2,935.