Industrial production falls

NEW YORK (CNNMoney.com) -- U.S. industrial production dropped more than expected in February as the recession hurt consumer demand for big-ticket items, government data showed Monday.

A report from the Federal Reserve said industrial production fell 1.4% last month, the fourth straight month of decline. That's the lowest level since April 2002.

Economists expected a 1.3% decrease, according to a consensus estimate from Briefing.com. January's drop was revised to 1.9%.

The index has fallen 10 of the past 12 months, and the February reading is 11.2% below the previous year.

"There is no relief in sight as inventories rocket and exports plunge," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research note. "More bad news is ahead."

Capacity utilization - which measures factories' current production output as a percentage of their maximum capability - fell to 70.9%, matching a December 1982 record low.

Economists were expecting a reading of 71% in February, and January's capacity use reading was revised down to 71.9%.

A 7.7% drop in utility output - likely weather-related - dragged down capacity use, Shepherdson said. Manufacturing output fell 0.7%, following a 2.7% drop in January.

"The monthly numbers are erratic but the trend is clearly downward," Shepherdson said.

A 10.2% rebound in auto production boosted the manufacturing reading, he added. That follows a 24.7% drop in January, coming off holiday shutdowns.

The global economic slowdown has hammered consumers' purchasing power. Mass layoffs, pay cuts, and the credit crunch have limited Americans' ability to buy products like cars and other big items.

Many large U.S. companies also feel the crunch. Corporations that depend heavily on export orders are suffering from lack of overseas demand, which continues to drag down the manufacturing sector.