U.S. Industrial Production Fell 1.4%

Industrial production fell in February for the fourth consecutive month as auto cutbacks and collapsing exports hurt the broader U.S. economy.

Output at factories, mines and utilities dropped 1.4 percent last month, more than forecast, after a revised 1.9 decline in January, the Federal Reserve said today in Washington. The amount of factory capacity in use slumped to 70.9 percent, matching the lowest level on record.

The worst financial crisis in seven decades has choked off credit to consumers and businesses worldwide, leading to a slump in sales of cars, houses, airplanes and computers. Boeing Co. and United Technologies Corp. are among companies that have announced thousands of jobs will be cut to trim costs as the global economy contracts.

“The industrial sector is still struggling with a glut of inventories and both employment and production are likely to continue to fall,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We’re not out of the woods yet.”

Economists forecast industrial production would drop 1.3 percent, according to the median projection in a Bloomberg News survey of 68 economists. Estimates ranged from declines of 2.2 percent to 0.3 percent.

Worst Since 1975

In the 12 months ended in February, industrial output was down 11.2, the biggest year-over-year decline since 1975.

Another report today showed manufacturing in New York state contracted in March at the fastest pace on record as orders, sales and inventories plunged. The Fed Bank of New York’s general economic index dropped to minus 38.2, the lowest level since data began in 2001, from minus 34.7 in February.

The proportion of plants in operation matched the December 1982 reading as the lowest since data began in 1967. Economists had forecast that figure would fall to 71 percent, according to a separate Bloomberg survey.

Factory output, which accounts for about four-fifths of industrial production, decreased 0.7 percent, led by declines in furniture, appliances, machinery and computers.

Motor vehicle and parts production improved 10 percent in February after plummeting 25 percent the prior month, the report said. Automakers assembled cars and light trucks at an annual rate of 4.73 million during the month, second only to the 3.83 million assembled in January as the weakest since records began in 1967.

Auto Spillover

Excluding automobiles, factory output dropped 1.2 percent.

Utility production decreased 7.7 percent, propelled by unseasonably warm weather that caused declines in the use of electricity and natural gas. Mining output, which includes oil drilling, decreased 0.4 percent.

The auto industry is at the center of the manufacturing slump. Car sales in February slid 41 percent to the lowest rate since December 1981, according to Autodata Corp., led by a 53 percent drop for General Motors Corp.

“This remains a very challenged industry that is the reflection of the severe economic crisis,” Mike DiGiovanni, chief auto market analyst at GM, said on a conference call last week.

Pittsburgh-based PPG Industries Inc., the world’s second- biggest paint maker, last week said it will cut an additional 2,500 jobs because of the decline in auto sales.

Export Slump

Others are suffering from slumping demand, both here and abroad. American exports plunged in January to the lowest level since 2006, according to figures from the Commerce Department last week. The drop reflected falling sales of automobiles, semiconductors, telecommunications gear and drilling equipment.

Boeing is slashing about 10,000 jobs and has said it could cut production by about 10 percent next year if more bookings are deferred or canceled. The Chicago-based plane maker has won just 22 orders this year, down from 190 by this time in 2008, and has logged 32 cancellations.

United Technologies, the maker of Otis elevators and Carrier air conditioners, said last week it plans to cut 11,600 jobs as sales slow.

Economists surveyed by Bloomberg say the economy may shrink at a 5.2 percent pace in the current quarter after a 6.2 percent contraction in the previous three months that was the worst since 1982.

“Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall” in January and February, the Fed said March 4 in its latest regional business survey. “The drop in activity was especially pronounced for makers of capital goods and construction-related equipment and materials.”