No joy in Mudville - both the Panthers and industrial production have fallen hard. Production fell two percent in December with declines in autos, machinery and computers. Capacity utilization levels continued to decline, suggesting declining profits. These data are consistent with our recession outlook for the first quarter.

Broad-based Weakness in Manufacturing

* Manufacturing production has declined 9.9 percent compared to a year ago, with weakness in autos and construction supplies registering the biggest declines.

* Unfortunately, the weakness in business equipment (down seven percent versus year ago) reflects the fundamental deficiency in corporate profits and a lack of confidence.

Capacity Utilization: A Weaker Profits Signal

* Historically, lower capacity utilization rates have been consistent with weaker corporate profits. Over the last year we have seen utilization declines in manufacturing and utilities. There has also been a sharp drop-off in utilization in the computer sector which suggests much weaker output and profits, as well as further layoffs in that sector.