U.S. industrial production -- which includes output at factories, mines and utilities -- plunged in October by the largest amount in nine months, revealing another troubling sign for an economy already dipping under the continued troubles in housing and auto-related industries.
The Federal Reserve said industrial output fell 0.5 percent last month, the first drop since May this year and the largest since January. The report surprised economists mainly because production of a broad variety of factory goods declined more than had been expected.
The report said the October decline was spurred by a sharp dip in electrical and natural gas output due to warmer-than-normal weather during the month. The other contributing factor was the effect the third straight drop at auto factories and further weakness at industries producing lumber, appliances and other products tied to housing.
Economists said the new report proved how troubles in the housing industry have started to spread to other parts of the economy. According to the Associated Press, analysts believe the economy will slow down significantly in Q4 and in Q1 of 2008, with many raising the odds for a recession.
Interest rates have been cut twice since September, but Federal Reserve Chairman Ben Bernanke has sought to lower expectations for further rate cuts to boost economic growth.