U.S. industrial production plunged 0.7% in April 2008, the U.S. Federal Reserve announced Thursday, as a spectrum-wide contraction took place in the nation's factories.

Economists surveyed by Bloomberg News had expected industrial production to decline 0.3% in April 2008.

Further, factory output plummeted 0.8% - - the largest drop in factory output since September 2005, a month that reflected the abnormal, irregular factory output reduction caused by Hurricane Katrina in the late summer of 2005. Excluding autos and auto parts, factory output declined 0.4%.

Also, capacity utilization increase declined to 79.7% in April 2008 from 80.4% in March 2008. Economists surveyed by Bloomberg News had expected capacity utilization to total 80.1% in April 2008. Capacity utilization totaled 80.3% in February 2008.

Industrial output evaluation

Economist David H. Wang said the April 2008 industrial production statistic reflects a familiar theme in the current U.S. economic slowdown: a contracting factory sector.


"After a one-month rise or respite, our factories resumed their downward path, and we continue to see losses sector-wide. It is a major source of reduced output and job losses in the U.S. economy," Wang said. "The April data shows we have had a pronounced decline in factory output for about 9 months and this will weigh on commercial activity. This means we are most likely in a recession and I would be very surprised if Q2 GDP does not turn out to be negative."

In April 2008, consumer goods production dropped 0.8%, business equipment declined 1.1%, industrial materials fell 0.8%, and mine output dropped 0.8%. On the positive side, high-tech production increased 1% and utilities output rose 0.3%.

The monthly industrial production statistic indicates how much factories, mines, utilities and related plants are assembling/forging. Further, although the manufacturing sector accounts for less than 20% of the U.S. economy, because a considerable portion of it is cyclical activity, the report has a major impact on the stock market. Many economists and analysts also argue that industrial output reflects longer-term trends in the U.S. economy, due to the large capital amounts and long-term planning involved in initiating industrial operations.