U.S. industrial production and capacity utilization dropped in September, in the wake of the terrorist attacks of September 11.

BMO Nesbitt Burns reports that industrial production fell a weaker-than-expected 1% in the month, while the prior month was revised up a bit to -0.7%, from -0.8%. September’s drop was the twelfth in a row, a string not seen since World War II. “High-tech was weak again, but the overall slowdown was broad-based. Excluding high-tech, output fell for the second month in a row. The declines in other sectors ranged from autos, to energy products, home electronics, and to computers & office equipment,” notes BMO.

Lower capacity utilization is also the order of the day, down 0.9% to 75.5%. This is well below last September’s level and the lowest in over 18 years. BMO says the soft reading should translate into lower inflation in coming months.

“The trajectory during the third quarter showed an accelerating decline. We would caution that the impact of the terrorist attack and shutdown of U.S. airlines undoubtedly depressed the September results,” notes BMO. “We will have to wait for the October figures to see if the downturn has snowballed or a bounceback is in the works.”