Factory Output Shows Modest Gain

The first gain in U.S. industrial output since July and a report showing that inflation remains tame raised hopes Tuesday that the U.S. economy may be emerging from its “soft spot.”

The Federal Reserve said industrial production eked out a 0.1% gain in November, boosted by automotive production. It was the first gain in total output since July’s 0.7% advance.

The factory sector has been hard hit by last year’s recession. After showing signs of revival this year, manufacturing again slumped as the summer ended. November’s gain, though small and led by the volatile auto sector, cheered economists.

Meanwhile, the Labor Department reported Tuesday that consumer prices rose only 0.1% in November, and 0.2% excluding food and energy.

Christine Chmura, chief economist with Chmura Economics & Analytics in Richmond, Va., said the reports show the economy is not slipping back into recession.

“The latest reports provide some good evidence that we’re beginning to move out of this soft part of the economic cycle,” she said.

Though November’s gain in industrial output was seen as a positive, economists also noted that it was boosted by a sharp 3.9% gain in auto production. And industries were running at only 75.6% of potential capacity in November, well off the recent high of 83.6% seen in May 2000.

“The small 0.1% increase in total and manufacturing production was not much help to most manufacturers,” said Daniel Meckstroth, chief economist for the Arlington, Va.-based Manufacturers’ Alliance/MAPI.

“Industry needs a re-accelerating general economy and more export opportunities to employ idle capacity and thus stimulate a rebound in capital spending,” he said.