The U.S. economy moved deeper into recession last month as industrial production dropped for the fourth month in a row and weak demand for many products helped reduce prices charged by producers for finished goods by 0.1 percent, the government reported yesterday.
"The economy is deeply in recession at this time and continuing to slide," observed Allen Sinai, chief economist of the Boston Co., after the latest figures were released. "The private sector of the U.S. economy is doing very badly."
The output of the nation's factories, mines and utilities fell 0.4 percent last month, the first time the industrial production index has dropped for four consecutive months since 1982, the Federal Reserve said. However, the decline was smaller than in the previous three months: 1.1 percent in December, 1.6 percent in November and 0.6 percent in October.
Sinai said that industrial production plummeted at an annual rate of more than 13 percent in the final three months of 1990, an exceptionally sharp rate of decline. After such a quarter, he said, the smaller loss of output last month was not surprising.
"It could hardly get worse. Instead of horrible, it's just bad," Sinai said.
Undersecretary of Commerce Michael Darby agreed that the recession has continued to worsen, but he said, "I see signs for hope." Among them is a recent pickup in growth of the money supply following aggressive interest rate reductions by the Federal Reserve and falling inflation.
Darby said the Bush administration's forecast that the recession will end before the middle of the year "looks quite reasonable. Whether we will beat it is another question."
Sinai, for all his gloomy assessment of the latest figures, noted that "declines in inflation and lower short-term interest rates are part of the process of forming a bottom" for the recession. "The data do not show that a bottom is forming, or that one will come in the next two months, but by spring one is possible," he said.
Finished goods prices charged when they are first sold by their producers fell 0.1 percent last month, primarily because of a 10 percent drop in gasoline prices and a 6.2 percent fall in home heating oil costs. Food prices dropped 0.3 percent for the month, according to the Labor Department report.
Prices for finished goods other than food and energy products rose 0.5 percent, partly because makers of alcoholic beverages, apparently taking advantage of an increase in federal liquor taxes that was causing prices to go up anyway, raised their share of the selling price by a record 5.9 percent.
New car prices, which usually fall significantly in January, went up instead, producing a seasonally adjusted 2 percent increase in their costs.
Since most of the prices included in yesterday's report were measured before fighting began in the Persian Gulf and crude oil prices fell sharply, analysts predicted another drop in producer prices for this month as additional declines in energy prices are picked up.
Part of the slower decline in factory output last month was due to the recall of some auto workers who were laid off in December. Excluding motor vehicles and parts, industrial production decreased 0.6 percent, slightly less than during the previous three months, the report said.
But with auto sales continuing to be extraordinarily weak, some automakers are setting their production schedules only one week ahead, so that the gains in auto output last month could be reversed quickly.