The decline in U.S. industrial production in the current recession has been as severe as in the 1970s and in some months, as severe as in the 1930s. The deterioration in industrial activity slowed in Q2 2009 and industrial production turned around in July 2009, while the ISM Index reached expansion territory in August 2009. Due to the plunge in consumer demand and slowdown in exports starting Q4 2008, firms aggressively cut inventories in H1 2009. The slowdown in the inventory drawdown boosted GDP growth in Q4 2009 and inventory restocking will support production in early 2010. Plunging sales and credit crunch in late 2008/early 2009 caused firms to slash capital spending (especially on equipment) and lay off workers. With improving credit conditions and consumer spending owing to policy measures in late 2009, firms cut spending and headcount at a slower pace, but firms will step up investment expenditure only when they see a sustained improvement in final demand. The decline in capacity utilization has been sharp during this cycle. Continued excess capacity and low resource utilization will prolong deflationary pressures in the economy, though some capacity destruction will be permanent in the goods and auto producing sectors. The impact of overcapacity on GDP growth and employment will be spread over the years.