By Peronet Despeignes in Washington Published: January 17 2001 18:55GMT | Last Updated: January 17 2001 21:19GMT In the final quarter of 2000, US industrial production sank at the sharpest rate in any quarter since the 1990-91 recession, according to figures from the Federal Reserve released on Wednesday, but the central bank's accompanying assessment of regional economic conditions hardly described an economy falling off a cliff. The Fed said its index of output from the nation's factories, power plants and mines declined 0.6 per cent in December, the third straight monthly decline and the sharpest in 30 months. Over the entire fourth quarter, output fell 1.1 per cent, the sharpest three-month decline since April 1991. Heavy winter-related demand on the nation's power plants failed to offset steep declines across the beleaguered manufacturing sector, which has for months suffered from slowing sales, the strong dollar, as well as higher energy and borrowing costs. Production of high-priced, old-line durable goods - autos, appliances and furniture - plunged, and output of computers, communication devices and other high-tech equipment - which appeared immune to the economic slowdown earlier this year - also weakened. The nation used only 80.3 per cent of its industrial capacity in December, an eight-year low. The grim report prompted renewed pleas for continued monetary easing by the Fed. Gordon Richards, the National Association of Manufacturers' chief economist, said the "grave" figures warranted "prompt" action from the Federal Reserve's policy-making open market committee, which meets in two weeks to consider more interest-rate cuts. But the report did not have a significant effect on the monetary policy outlook in futures markets, which over the past week have slightly scaled back the market odds of an aggressive easing this year. One concern cited by some economists as a possible restraint on Fed has been the surge in wage gains over the past year amid persistent labour shortages in the US. But the Department of Labor said on Wednesday that inflation remained tame in December with year-on-year growth rates for both its consumer price index and core CPI steady at 3.4 per cent and 2.6 per cent, respectively, after a year-long surge on the back of higher energy prices. The Fed's latest survey of regional economic conditions, the so-called "beige book," also released on Wednesday, appeared to support a "soft landing" scenario rather than a recession. It said economic growth merely "slowed" in December, easing continued labour shortages "somewhat" and "limiting" upward price pressures. Of all 12 Fed districts only the one, that of Philadelphia, reported an actual decline in economic activity. Retail sales were described as "lacklustre," manufacturing activity "weaker" and commercial real estate "showing signs of slowing." But banks reported no further deterioration in credit quality and businesses surveyed said the rising number of laid-off workers would likely be "reabsorbed due to strong pent-up demand" from other firms. Wage pressures were "similiar to or slightly less intense" than those in the previous survey, the report said. FT.com _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
