Monday, Sept. 15, 2003 | 9:14 a.m.
WASHINGTON -- Industrial production edged up by just 0.1 percent in August, restrained by weakness in manufacturing, especially for big-ticket goods such as automobiles.
The Federal Reserve said today the small increase in industrial activity came after a revised 0.7 percent advance in July, even stronger than the 0.5 percent first reported. August's performance, however, was weaker than the 0.3 percent increase that economists were expecting.
At factories, production dipped by 0.1 percent in August following three straight months of gains. The decline partly reflected a drop in the production of costly manufactured "durable" goods, expected to last at least three years, the Fed said.
Output of automobiles and parts, which declined by 2.6 percent in August, "was reduced in part by the power outage that affected several states and some startup problems associated with model changeovers," the Fed said.
"It seems clear the rebound in manufacturing is going to be a struggle," said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, a business research group.
Production at utilities, however, rose 1.9 percent in August, following a 3.8 percent increase in July. At mines, output increased 0.2 percent last month, down from a 0.3 percent gain.
On Wall Street, stocks were nearly flat. The Dow Jones industrial average was down around about 1 point and the Nasdaq was up about 1 point in morning trading.
In a second report, stocks of unsold goods at the nation's businesses inched down by 0.1 percent in July as sales increased by the largest amount in four months, a sign that companies remain wary of increasing inventories amid other indications of economic strength.
Businesses' sales rose by 1.6 percent in July, the biggest increase since March, the Commerce Department said today. In June, inventories were flat as sales went up by a solid 1.3 percent. The figures suggest that companies -- wanting profits to improve and unsure of the vigor of the anticipated rebound in the second half of this year -- are keeping stocks lean.
At July's sales pace, it would take businesses 1.37 months to exhaust their supplies. That inventory-to-sales ratio of 1.37 months in July was a record low and was down from 1.39 months in June.
In a second report from the department, the deficit in the broadest measure of trade held steady at a record $138.7 billion in the April to June quarter of this year.
The "current account" deficit for the second quarter was unchanged from the first quarter.
The current account deficit is considered the best measure of a country's international economic standing because it measures not just the goods and services reflected in the government's monthly trade reports, but also investment flows between countries and unilateral transfers, including U.S. foreign aid payments.
The second quarter current account deficit was on target with economists predictions. On the inventory front, economists expected inventories to be flat in July.
Because inventories are so lean, economists are hopeful businesses will get in the mood to build them up, something that would add to economic growth.
Some economists believe growth in the final six months of this year will clock in at a rate in the range of around 4 percent. Others think it will be closer to a 5 percent pace. Either way, such projected growth figures would be better than the 2.3 percent growth rate seen in the first six months of this year.
With signs that the economy is rebounding, the Federal Reserve is expected to hold a key short-term interest rate at a 45-year low of 1 percent when it meets Tuesday, economists said. Economists believe interest rates could stay at near rock-bottom levels for some time.
In the trade report, the deficit in goods widened to $138 billion in the second quarter, up from $136 billion in the first quarter.
In the services category, which measures things such as airline travel, the United States is running a surplus. The surplus increased to $14.6 billion in the second quarter, up from $14.4 billion in the previous quarter.
The U.S. surplus on investment earnings increased to $1.7 billion in the second quarter, compared with $191 million in the prior quarter. The category of unilateral transfers, which includes payments that the United States makes in foreign aid to other countries, narrowed to $16.9 billion in the second quarter, down from $17.3 billion in the first three months of the year.
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