Signs of Sluggish Revival
T he Federal Reserve’s index of industrial production at the nation’s mines and utilities rose 0.2% in March, following a 0.5% advance in February. They were the first back-to-back gains since June and July, 1991. In an accompanying report, the Fed said the operating rate at factories, mines and utilities rose to 78.1% of capacity, up from 78% in February. A Commerce Department report for February showed a 1.4% increase in business sales, the best in 10 months, and no change in business inventories. Economists saw the reports as a positive sign for stronger economic growth by this summer. If sales stay strong, factories soon will be forced to increase production to restock empty shelves and back lots. Good signs: The Federal Reserve said production in March was bolstered by a 2.1% jump in utility output, attributed largely to unseasonably chilly temperatures in many parts of the country. Factory production rose 0.1%. Output of durable factory goods, big-ticket items expected to last three or more years, rose 0.1%, while the output of non-durable goods increased 0.2%. Within durable goods, increased production of trucks, appliances and furniture helped offset a 3.4% drop in auto output. Overall, the Fed said its industrial production index in March stood at 107.2% of its 1987 base, up from 106.9% in February.
Bad signs: The production increases followed three declines and a month of no change. Also, total industrial output in March was 1% below the level in September. This means few new jobs appear to be on the horizon. And for the first quarter as a whole, industrial production declined at an annual rate of 4.1% after falling 0.7% in the previous quarter, the Fed said. Retail sales also fell again in March, and that may further string out the period required for a vigorous rebound to set in. “It indicates we’re seeing a slow-motion recovery at best,” said Sung Won Sohn, an economist with Norwest Corp. in Minneapolis. “We need to see a stronger rate of improvement later in the year before we can get a pickup in employment prospects.”
Industrial Production Seasonally adjusted index, 1987 = 100 March, ’92.: 107.2 Feb., ‘92: 106.9 March, ‘91: 105.0 Source: Federal Reserve Board
