Production at the nation’s mines, factories and refineries contracted 0.4 percent last month, after a 0.2 percent increase in September, the Fed said. It said the storm, which hit the East Coast at the end of October, cut output by nearly one percentage point. Utilities and producers of chemicals, food, transportation equipment, and computers and electronic products were the most affected, it said.

Still, the gain in output last month would have been modest even without the storm, with fears about the possibility of higher taxes and sharp cuts in government spending early next year making businesses hesitant to raise output and invest.

Those measures would drain about $600 billion from the economy unless Congress and the Obama administration agree on a plan to soften the blow.

Industrial output contracted in the third quarter for the first time since the 2007-9 recession ended, a hard landing is not expected for the industrial sector.

Economists are divided on whether industrial output will bounce back in November. Some expect the effects of the storm to linger longer.

“Sandy’s impact is also likely to be felt in the November industrial production data as power outages and other disruptions in the Northeast persisted into the second week of the month,” said Jeremy Lawson, an economist at BNP Paribas in New York.

Last month, utilities output fell 0.1 percent, even though parts of the Northeast lost power during the storm. Utilities production was flat in September. Production at mines increased 1.5 percent after rising 0.9 percent the previous month.

The amount of factory capacity in use — a measure of how fully firms are using their resources — slipped 0.8 of a point, to 75.9 percent in October, the lowest level since November 2011.

Article source: http://www.nytimes.com/2012/11/17/business/economy/industrial-production-declines.html?partner=rss&emc=rss