Auto Production Decline Holds Down April Report : Economy: Industrial output rose for 11th straight month but not at levels likely to spur inflation, experts say.
A decline in auto production held back the nation’s industrial output for April though it still rose for an 11th straight month.
Monday’s report by the Federal Reserve also showed factories operating at fairly high capacity but not, analysts said, at levels likely to spur rapid inflation.
On the eve of what could be an important decision on interest rates, the Fed said industrial production rose a modest 0.3% last month.
The manufacturing advance was slowed by what analysts said was an inevitable cutback in auto and truck assembly lines from peak capacity.
“It makes things look a little weaker than they probably are,” said economist Cynthia Latta of DRI-McGraw Hill, a Lexington, Mass., forecasting service. She said Detroit assembly lines “were running flat out so they couldn’t increase.”
The impact of declining car production may be exaggerated in the April report, she said, because it usually is a big month for motor vehicle output and the government figures adjust for seasonal factors.
But Priscilla Trumbull of the WEFA Group in Bala Cynwyd, Pa., said the report still may be disappointing to manufacturers who were hoping for greater expansion in the current second quarter of the year after the disruptions of an extraordinarily difficult winter.
“We’re not in a real fast-growth environment. But we are in a good growth environment,” she said.
The Federal Reserve also reported the operating rate at industrial companies held steady at 83.6% in April, maintaining the highest rate since it was 83.9% in June, 1989.
That comes on the heels of earlier encouraging inflation news on Friday, when the government reported a small rise in consumer prices in April.
Despite the latest calming figures, many analysts expect the Fed to boost short-term interest rates for the fourth time this year--probably today when the central bank’s policy-setting Open Market Committee meets.
“The bottom line is that manufacturing output is still expanding at a pace deemed too fast by the Fed,” said Carl Palash of MCM MoneyWatch in New York City.
The factory output gain in April would have been more than 0.1% higher had it not been for a 2.9% drop in car and truck assemblies.
Detroit had pushed production to near capacity in February--the highest level in decades--and was unable to achieve further gains normally expected in March and April, the Fed said.
The Federal Reserve said 12.5 million motor vehicles were assembled in April at a seasonally adjusted annual rate, down from 13 million in March and 13.9 million the month before.
Before April, overall industrial production rose 0.5% for each of the three previous months.
The decline in automotive production more than offset small gains in output of other consumer goods. All told, consumer goods declined 0.1% in April after increasing a like amount in March.
Gains in the output of fuels and clothing helped boost non-durable goods 0.3% despite a decrease in food production, after a 0.8% rise in March.
Durable goods, big-ticket items expected to last at least three years, rose 0.4% after advancing 0.6% in March. The latest rise was helped by continuing strength in manufacturing of appliances and business equipment.
Output at mines increased 0.1% in April on top of a revised 0.6% March increase.
Industrial Production
Seasonally adjusted index, 1987 = 100
April, ‘94: 116.0
Source: Federal Reserve Board
Capacity Utilization
Seasonally adjusted percent of total capacity
April, ‘94: 83.6
Source: Federal Reserve Board
