Industrial Production Rises Again : * Economy: Output at U.S. factories and mines rose a modest 0.3% last month, but it is still the strongest sector.

From Times wire Services

Output at U.S. factories, mines and utilities, one of the few warm spots in the nation’s economy, grew for a fifth straight month in August, the Federal Reserve said Tuesday.

Production at the nation’s factories, mines and utilities rose a modest 0.3% overall last month, led by higher output of consumer goods and business equipment. Among manufacturing industries alone, output also rose 0.3%.

Although the overall August rise was the smallest since March, when production fell, economists said the output gains of goods other than cars shows that manufacturing is still the strongest sector of the economy as it emerges from recession.

Auto production--which plunged 9.3% after five straight monthly increases--dragged down the total figure. Excluding cars, industrial output rose 0.5%.


“The report says the recovery in the industrial sector is alive and well,” said economist David Jones of Aubrey G. Lanston & Co., a New York securities dealer. “The problem is what’s going on in the rest of the economy.”

Jones noted that in past recoveries consumer spending and the housing sector provided the economy with the muscle to pull itself out of recession.

This time, Jones added, consumer spending has faltered since picking up immediately after the Gulf War, “housing is doing no more than stumbling along,” and the service sector remains in a recession.

Without increased consumer spending, which represents two-thirds of the nation’s economic activity, “the economy either will pause or perhaps slip into a double dip sometime next year,” he contended.


Overall, the manufacturing sector operated at 80.0% of its total production capacity last month, its highest level since January, the Fed said.

Economists said they were encouraged by a sharp 1% gain in consumer-goods production other than cars, which included higher clothing and food output, and with a 0.5% rise in output of business equipment other than cars.

“That should be encouraging,” said economist Mohsen Bonakdarpour of the WEFA Group forecasting firm in Bala-Cynwyd, Pa. “That’s a sign of a recovery period.”

“While the August growth rate of industrial production is slower than in preceding months, these figures are favorable in one critical respect: They indicate that the rise in industrial activity is now spreading throughout the economy,” added Jerry Jasinowski, president of the National Assn. of Manufacturers.


Although economists believe that the recession that began in July, 1990, is over, the recovery has been spotty. Job and income growth have been slow, consumer spending has been less than robust, and retail sales have been erratic, while manufacturing and home building activity have been strong.

Industrial Production Rises Again

Seasonally adjusted index, 1987 = 100 Aug., ’91: 108.2 July, ’91: 108.0 Aug., ’90: 110.5 Source: Federal Reserve Board

Capacity Utilization


Seasonally adjusted percent of total capacity Aug., ’91: 80.0% July, ’91: 79.9% Aug., ’90: 83.6% Source: Federal Reserve Board