IMPEACH BUSH

WASHINGTON (AFP) — US industrial production plunged a shock 2.8 percent in September, the steepest fall in 34 years, due to hurricanes in the Gulf of Mexico and a strike at Boeing, the Federal Reserve said Thursday.

Hurricanes Gustav and Ike, which hammered the Gulf of Mexico region, a key hub of the US oil and gas industries, and a machinists strike at Boeing that has crippled civilian aircraft production, "severely curtailed output," the central bank said.

The plunge in output far exceeded analysts' consensus forecast of a scant 0.8 percent decline. It was the strongest fall since December 1974.

The Fed estimated the disruptions from the hurricanes on total output contributed some 2.25 percentage points to the decline.

"In addition to reductions in oil and gas extraction, hurricane-related shutdowns of petroleum refineries and petrochemical producers factored significantly in the decline; other manufacturing industries with storm outages made smaller contributions to the drop in output," it said.

The ongoing machinists union strike at Boeing, begun on September 6, contributed an estimated half percentage point to the overall decrease in industrial output.

RDQ Economics analyst John Ryding rejected the Fed arguments that the freefall was due to the hurricanes and Boeing strike.

"The weakness in production was broad-based as the only major categories of production that posted gains were vehicles -- this can hardly be expected to be sustained given trends in auto sales and current vehicle inventory levels, apparel, and electric power generation," Ryding said.

"We think the recession had some significant effect on restraining output," he added.

Ian Shepherdson at High Frequency Economics said that "regardless of the source of the September drop, it is a direct hit on GDP (gross domestic product). We now reckon Q3 GDP fell by more than 1.0 percent at an annualized rate."

On a 12-month basis, industrial production was down 4.5 percent in September, compared with a decline of 1.5 percent in August.

For the third quarter as a whole, industrial out decreased at an annual rate of 6.0 percent, the Fed said.

The capacity utilization rate for total industry fell to 76.4 percent in September, compared with a rate of 78.7 percent in August. The September rate was a whopping 4.6 percentage points below its average level from 1972 to 2007, and significantly below market expectations of 78.0 percent.

Manufacturing production fell 2.6 percent in September, after a 0.9 percent decline in the prior month.

The output of mines and energy plunged 7.8 percent after holding steady in August, as crude oil and natural gas operations in the Gulf of Mexico were suspended because of the hurricanes.

Utilities' output rose 2.2 percent, rebounding from a decline of 3.1 percent in the prior month, as temperatures returned to more normal levels in September after a relatively cool August, the central bank said.

A key regional indicator showed a record plunge, underscoring the rapid deterioration in the industrial sector.

The Philadelphia Federal Reserve said its index of manufacturing activity in the Northeast's Mid-Atlantic region plummeted to a negative 37.5 in September from a positive 3.8 in August, its largest one-month decline ever.