Industry Gets Jolt From July Utility Boom : Economy: Analysts contend that the declining manufacturing sector is headed for a rebound.

Americans turned up their air conditioners during July’s heat wave, boosting utility output and helping fuel the first advance in industrial production in five months despite weak factory production.

But although the manufacturing sector remained soft, many analysts contended that its recent decline appears to be ending.

“When we look back in January at all of 1995, we will find July the last weak number,” said economist Eugene Sherman of M.A. Shapiro & Co. in New York.

“The decline in the industrial side of the economy is coming to an end,” said Allen Sinai, chief economist with Lehman Bros. in New York.

The Federal Reserve Board reported Tuesday that industrial production rose a barely perceptible 0.1% in July, the first gain since February. It also said output in June, first believed to have risen 0.1%, actually fell 0.1%.

But it said the July advance was concentrated in utilities, where output shot up 3.6%. Manufacturing production fell 0.2% in July, the sixth consecutive month without an increase, although output was flat in March.

The Fed also reported little sign of inflationary pressures, saying industries were operating at 83.4% of capacity in July. The utilization rate was down from 83.6% in June and the lowest since 83.2% in February, 1994.

Although the current rate remains relatively high, it shows that industry still has room to expand without creating serious bottlenecks and price pressures.

Analysts said the weakness in manufacturing is evidence that businesses are continuing to make adjustments to their inventories, which built up earlier this year as consumer spending slowed.

“The worst problems appear to be in the auto sector, which has had to resort to generous incentives to clear cars off dealers’ lots,” said Jerry Jasinowski, president of the National Assn. of Manufacturers.

The Fed report said the drop in factory output was led by a 3.2% decline in auto production.

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Capacity Utilization

Seasonally adjusted percentage of total capacity: 83.4%

Source: Federal Reserve Board

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Industrial Production

Seasonally adjusted index: 121.3 (1987=100)

Source: Federal Reserve Board