Industrial activity drops in October

WASHINGTON -- Aftershocks from the terror attacks helped to depress industrial activity in October for the 13th straight month, the longest stretch of declines since the Great Depression. All the economic weakness, however, had a silver lining: Consumer prices fell.

The latest batch of economic reports released Friday painted a picture of a sinking economy that many analysts believe has slid into a recession. Against this backdrop, companies have cut prices to bolster sales and energy prices have fallen in response to weak worldwide demand, thus keeping a lid on inflation.

The Consumer Price Index, a key gauge of inflation, declined by 0.3 percent in October, following a 0.4 percent rise in September, the Labor Department said. The drop in prices is good news for consumers and highlighted one of the few benefits a weakening economy can provide.

"There will be many more bargains in the months ahead, especially with the holidays approaching," predicted Bill Cheney, chief economist for John Hancock Financial Services.

Whittling inventories

While heavy discounting and zero-percent financing for cars sent retail sales up by a record 7.1 percent in October, that didn't translate into ramped up production during the month. But it probably helped businesses whittle excess inventories of unsold goods, economists said.

Industrial production plummeted in October for the 13th straight month, falling by 1.1 percent, on top of a big 1 percent decline in September, the Federal Reserve said.

The 13-month stretch of declining activity marked the longest period of falling industrial output since a 15-month stretch that ended in July 1932.

Although manufacturing is clearly ailing, it's not nearly as sick as it was during the Depression, economists said. While industrial output fell by a cumulative 6.5 percent over the 13 months, it sank by 53 percent from July 1929 through July 1932.

Still, the nation's manufacturing sector has been hardest hit by the more than yearlong economic slump and the Sept. 11 terror attacks dealt the industry another severe blow. To cope with the fallout, companies have sharply cut back production, trimmed hours, let go of workers and heavily discounted merchandise.

"The manufacturing recession has entered its 13th month," lamented David Huether, chief economist at the National Association of Manufacturers.

The 1.1 percent drop in industrial activity was the biggest since a 1.3 percent decline in November 1990. The weakness was broad-based, with production declining for autos, appliances, high-tech equipment, clothing, metal products and business equipment.