US industrial production, output at the nation’s factories, mines, and utilities, fell 2.8% in September, the biggest decline since 1974. While the number reflects a production halt in the Gulf of Mexico, due to Hurrican Gustav and Hurricane Ike earlier in the month, the number was significantly below estimates. Economists were expecting a output drop of 1.5%.

According to the Federal Reserve (via MarketWatch), the two hurricanes subtracted about 2.25 percentage points from output in September. Crude oil and natural gas operations in the Gulf of Mexico were suspended in the month. A strike at Boeing Co. also had a negative impact on production.

Industrial output is down 4.5% in the past year. In the third quarter, production declined 6%.

Capacity utilization, a key gauge of inflationary pressures, fell to 76.4% from 78.7%. This is the lowest level since October 2003. Lower capacity usually leads to slower inflation, as producers compete with each other for work.

Report Details

Factory output fell 2.6%. The output of consumer goods fell 1.4%, as durable goods production fell 0.7% and nondurable goods fell 1.5%.

Consumer durable goods were weighed down by a drop of 3.3% in the production of appliances, furniture and carpeting.

The index for automotive products rose 1.7% in September after having dropped 11% in the previous month.

Mining output fell 7.8% in September. Semiconductor production rose by 0.1%, while computer equipment rose 0.9%. Production of non-industrial supplies fell 1.7%, after falling 0.6% in the previous month.

The production of business equipment fell 7.0% after falling 0.2% in August. Output of construction materials was down 1.5%.

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