The Economy : Production Grows; Inventories Shrink

Indicators: The June industrial production report and business inventory figures for May.

What they did: Industrial production rose 0.7%, its third straight advance, the Federal Reserve reported. Meanwhile, the Commerce Department said business inventories shrank 0.5% to a seasonally adjusted $812.5 billion. It was the fourth straight decline.

What it means: Analysts say that together the reports show the industrial economy, which had slumped for two years, continued a moderate recovery from the recession.

Highlights: Output of durable goods--items such as automobiles and appliances expected to last more than three years--was up 0.8%, its third straight gain. Production of non-durable goods such as food and fuel also rose for the third straight month, up 0.6%. And the lean inventory level suggests that any growth in consumer spending could spur production to keep up with demand and thus create jobs.

Factory Operating Rate Increases

Indicator: The June capacity utilization index, which tracks the operating rate of the nation’s factories, mines and utilities.

What it did: The rate advanced 0.3 percentage point to 79.3%.

What it means: Analysts note the rate was up from 79% in May but still below the 83.7% figure of a year ago.

Highlights: The rate at factories was 78.1%, up from 77.7% in May. The operating rate at mines jumped to 89.1% from 87.9% in May. But at utilities, the rate slipped 0.6 percentage point to 84.9%.

Industrial Production Seasonally adjusted index, 1987 equals 100 June, ‘91: 106.9% May, ‘91: 106.2% June, ‘90: 110.1% Source: Federal Reserve Board

Capacity Utilization Seasonally adjusted percent of total capacity June, ‘91: 79.3% May, ‘91; 79.0% June, ‘90: 83.7% Source: Federal Reserve Board