Falling Auto Output Stalls U.S. Industrial Production : Economy: But the Fed’s news of sluggishness in the manufacturing sector is countered by a welcome report on the sales front.

Industrial production was unchanged in July after two consecutive monthly advances, held down by a sharp decline in automobile output, the Federal Reserve said today.

“Swings in motor vehicle production during the past few months have had a noticeable effect on total output,” the Fed report said. “In July, production of both autos and trucks fell sharply.”

Excluding motor vehicles, industrial output rose 0.2% last month, about the same rate of growth so far this year.

Many analysts had anticipated a slight increase in production, and the Fed’s report was further evidence of sluggishness in the manufacturing sector of the economy.

But the report also noted a significant decline in output of stone, clay and glass products, which it said reflected weakness in the construction industry as well.

Production also declined in electrical machinery, especially appliances, and non-electrical machinery, particularly information processing equipment.

In a separate report, the Commerce Department said business inventories declined 0.4% in June while business sales posted a 1% gain for the second consecutive month.

Sales totaled a seasonally adjusted $544.4 billion, up $5.5 billion from the previous month. The back-to-back gains were the strongest since February, when sales rose 1.4%. Sales slipped 1% in April.

Inventories held on shelves and back lots in June totaled a seasonally adjusted $797.3 billion, down $3.1 billion from May, when inventories posted a 0.5% advance. It was the largest drop since a similar 0.4% decline in February.

The Commerce report, which was in line with many forecasts, was good news for the economy, showing that businesses generally were keeping their inventories relatively low.