Industrial Production Pace Slows

U.S. industrial production rose less than expected in February, a slowdown that may be short-lived as lean inventories suggest factories will step up output in coming months, figures showed Wednesday.

Production at factories, mines and utilities rose 0.3% last month after rising a revised 1.1% in January, as gains in semiconductors and computers were offset by declines in output of autos and home appliances, the Federal Reserve reported. Analysts, who had forecast a 0.6% increase, said they doubted that the Fed report signals the economy is slowing after four interest-rate increases since June.

A Commerce Department report showed that U.S. business sales grew faster than inventories in January, holding stockpiles to their leanest on record.

“The February slowdown will prove temporary,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y. “With car sales still rising to new records and inventories low, an upward trend seems assured for at least the next few months.”

Meanwhile, inventories at retailers, wholesalers and factories grew 0.5% in January as sales rose 0.8%, the Commerce Department reported. That pushed the inventory-to-sales ratio, which measures the time goods sit unsold, to a record low 1.31 months in January from 1.32 months in December.

A Labor Department report showed U.S. import prices in February rose 1.9%--the largest gain in nine years--as the cost of petroleum soared 13.9%, the Labor Department reported. Excluding oil, prices rose 0.3%.

Rising prices worry Fed policy-makers. Those imbalances, coupled with signs of further growth, reinforce expectations for a fifth Fed interest-rate increase next week, analysts said.

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Industrial Production

Index; 1992=100; seasonally adjusted:

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February: 142.1

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Source: Commerce Department