Factory production creeps up again

September 15, 2010

Production at U.S. factories grew in August for the 12th time in 14 months, but at a slower rate than earlier this year as consumers spent cautiously.

Overall output at the nation's factories, mines and utilities edged up 0.2 percent last month, the Federal Reserve reported Wednesday. It rose 0.6 percent in July.

Production gains at factories, the largest single element of industrial production, slowed to 0.2 percent after rising 0.7 percent in July. Much of the softness came from a decline in auto production, which spiked in July. Excluding autos, manufacturing output rose 0.5 percent.

Production rose for basic consumer goods such as food, clothing and paper by more than 1.0 percent. Factories produced 0.7 percent more business equipment in August.

Manufacturing has helped drive economic expansion over the past year. Companies built up their stockpiles in the first half of the year after slashing them during the recession. But factory output has slowed in recent months. Businesses are no longer rebuilding their inventories. At the same time, demand for goods remains weak because consumers are saving more and spending with caution.

"Consumers have failed to take up the baton," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.

Weak demand will likely keep economic growth slow through the end of 2010, Ashworth said.

"The best that can be said is that the economy isn't heading back into recession," he said in a research note.

The nation's factories were operating at 74.7 percent of their capacity, up 0.1 percent from July. That's still well below the average since 1972 of 80.6 percent.

Production at mines grew 1.2 percent. The nation's mines are operating at 86.3 percent of their capacity, just 1.1 percent below the average since 1972. Utility production fell by 1.5 percent.


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