US manufacturing: no sign of recovery in sight
A larger than expected fall in US manufacturing activity for June has prompted fears that the sector is in a recession nearly as severe as in 1990-91. Hopes that the sector had bottomed out were dashed with analysts becoming increasingly pessimistic following the news.
According to the Federal Reserve, production fell by 0.7% last month following a 0.5% drop in May - the ninth month in a row that there has been a fall. The industrial sector was operating at 77 percent of capacity in June, compared with 77.6 percent in May.
For the second quarter to June, total industrial output fell at an annual rate of 5.6 percent, following a 6.8 percent rate of decline registered in the first quarter.
Manufacturers in the US have been trying to cope with the situation through production cuts and redundancies, while the Federal Reserve has done its bit by slashing interest rates. This year has seen rates fall six times totaling 2.75 percentage points. The reductions have been aimed at lowering borrowing costs and generating consumer spending and business investment, which would rejuvenate economic growth.
Although the strategy has yielded few positive results, it is thought that the chairman of the Federal Reserve, Alan Greenspan, will not rule out further cuts in the future.
