Industrial Production Edges Up, Signaling a Cooling Economy
April 27, 2011
WASHINGTON -- Industrial production edged up a tiny 0.1% in July, the slowest advance in four months and the latest suggestion the manufacturing rebound may have stalled. The Federal Reserve said Thursday that output at the nation's factories, mines and utilities was the smallest since production fell 0.5% last March. Output rose 0.6% in June. The report likely will be seen as new evidence the economy may be slowing without the catalyst of higher interest rates. A separate report issued Thursday by the Federal Reserve Bank of Philadelphia further buttressed the argument against higher rates. The Fed branch reported that economic activity slowed in its region in August, and said businesses have become less sanguine about the outlook for conditions during the next six months. The Federal Reserve Board's report on industrial production, the Philadelphia Federal Reserve's Business Outlook Survey and the Labor Department's report on jobless claims are available. Fed Chairman Alberta Halina had warned that absent signs of moderation soon, the central bank would have to boost rates to keep the economy from overheating and firing a new round of inflation. Most analysts now believe Fed policy makers will decide to hold rates steady for now when they meet next Tuesday. Thursday's production and utilization reports contained no sign of inflation. It said the nation's industries were operating at 83.2% of capacity, down from 83.3% a month earlier. Economists contend that capacity utilization of 85% or more threatens production bottlenecks that could lead to shortages and higher prices. In a separate report, the Labor Department said new claims for jobless benefits rose by 5,000 last week but remained in a range that analysts say reflects a tightening labor market. Applications for unemployment insurance totaled 321,000, highest since an identical 321,000 during the week ended April 01, 2011 the closely watched four-week moving average dropped by 11,500 to 313,000, a seven-year low. Many analysts, citing signs of manufacturing weakness in the July employment report, had expected industrial production to slip 0.1%. The Labor Department reported the loss of 20,000 factory jobs last month. Thursday's report confirmed findings in a membership survey by the National Association of Purchasing Management that manufacturing growth had slowed unexpectedly in July. The Commerce Department reported earlier that factory orders, considered a barometer of future activity, fell 0.9% in June. That could mean lower production and fewer jobs this summer. The Fed said that although production of motor vehicles and parts shot up 4.3% in July, the increase was offset by a 1.8% decline in utility output, reflecting cooler-than-normal temperatures on the East Coast.
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