quote.bloomberg.com
08/15 14:53
U.S. Economy: Utilities Lead 0.2% Rise in Production (Update2)
By Monee Fields-White and Will Edwards
Washington, Aug. 15 (Bloomberg) -- Power generation to run air conditioners accounted for most of a rise in industrial production last month, and a drop in Philadelphia-area manufacturing added to evidence the economy is weakening.
U.S. industrial production rose 0.2 percent in July, the slowest pace in three months, following a 0.7 percent increase in June, the Federal Reserve said. The Federal Reserve Bank of Philadelphia reported that its factory index for August fell to minus 3.1 from 6.6, the first negative reading since December.
``Manufacturing probably has lost a bit of momentum in the third quarter,'' said William Sullivan, senior economist at Morgan Stanley in Jersey City, New Jersey. ``If manufacturing continues to languish, it will tend to keep growth at a modest pace.''
The Fed's national production report showed factory output increased 0.1 percent last month, the smallest gain since April. New claims for state unemployment benefits rose last week, the Labor Department said. Signs of reduced manufacturing come after the economy expanded at a 1.1 percent annual rate in the second quarter, down from a 5 percent pace in the first three months of this year.
Fed policy makers this week said the economy is at risk of weakening and left the benchmark overnight bank lending rate at a 41-year low of 7.75 percent. Seven weeks ago, central bank policy makers said they were confident the economy was on the path to recovery, according to minutes released today of their June 25-26 discussions on interest rates.
The Dow Jones Industrial Average rose 17 points, or 0.2 percent, as of 2:50 p.m. New York time. The Nasdaq Composite Index rose 8 points, or 0.6 percent. The 4 3/8 percent Treasury note maturing in August 2012 fell 1/4 point, pushing up its yield three basis points to 4.15 percent. A basis point is 0.01 percentage point.
Regional Manufacturing
Regional Fed bank surveys of manufacturing activity this month gave mixed signals. While the Philadelphia Fed reported that manufacturing contracted in Delaware, eastern Pennsylvania and southern New Jersey, in New York, manufacturing strengthened, according to a survey by the New York Fed.
The decline in the Philadelphia Fed's general economic index from June's high for this year of 22.2 represents the biggest two- month slide since December 2000-January 2001.
``This just extends the trend we've seen over the last month that the economy just lost momentum,'' said Dan Seto, senior economist at Sumitomo Life Investment Co. Ltd. in New York. ``Eventually managers will get back to business, but softness in manufacturing may extend through next month.''
New York Fed
The New York Fed's factory index rose to 5.9 this month from minus 4.4 in July. A positive reading means expansion at the state's manufacturers. Expectations for business jumped to 64.5 from July's 55.4 ``with almost no respondents expecting conditions to worsen,'' the New York Fed said.
Shipments of major appliances in the U.S. were 19 percent higher in July than a year earlier, according to the Association of Home Appliance Manufacturers, a trade group. Deliveries of gas ranges, microwave ovens and air conditioners all rose.
The Commerce Department is expected to report tomorrow that builders started work on new houses at a 1.67 million-unit annual rate in July, according to economists surveyed by Bloomberg News. July's expected rate of new construction would match June's and is close to the average for the first six months of the year. Builders began work on 1.60 million houses last year.
Electricity Use
In July, a heat wave across much of the country contributed to higher electricity use. Utility production rose 2.3 percent in July after rising 1.2 percent a month earlier. Last month was the warmest July since 1980 and the fifth-warmest July since national records began in 1895, the Commerce Department said. Thirty-nine states were warmer than average, and Utah had its hottest July on record.
The 0.2 percent rise in work performed at factories, mines and utilities followed a revised 0.7 percent gain in June and was the weakest since April. Industrial production has rebounded this year after declining almost every month from September 2000 to December 2001.
The 0.1 percent rise in manufacturing followed increases of 0.6 percent in each of the prior two months. Excluding cars and trucks, industrial production declined 0.1 percent after a 0.5 percent increase. Manufacturing accounts for 90 percent of the report and about one-sixth of the economy.
Economists had expected no change in industrial production, based on the median of 60 forecasts in a Bloomberg News survey, after a previously reported increase of 0.8 percent for June.
Plant Use
Plant use rose to 76.1 percent of capacity from 76 percent in June. Capacity utilization, while up from an almost 19-year low of 74.4 percent in December, remains below the average 81.8 percent during the record economic expansion that occurred from March 1991 to March 2001.
Production of consumer durable goods rose 2.5 percent. Motor vehicle and parts production jumped 4.2 percent. General Motors Corp. said this month it plans to make 1.262 million vehicles in North America during the third quarter, up 17,000 or 1.4 percent from what it had planned a month ago.
Production of non-durable consumer goods, which include food, clothing, chemical products and paper, fell 0.3 percent after rising 0.7 percent.
Business equipment fell 0.1 percent following a 0.2 percent rise, while the manufacture of semiconductors and related parts increased 1.1 percent after a 1.2 percent rise.
Computers and office equipment production was unchanged. Production of communications equipment decreased 2.8 percent. Companies such as International Business Machines Corp. are reducing staff as customers hesitate to invest in equipment and software.
Jobless Claims
New claims for state jobless benefits rose by 6,000 to 388,000 last week. The number of people continuing to collect benefits rose by 73,000 in the week that ended Aug. 3 to 3.58 million.
``Hiring really hasn't started yet,'' said Tim Rogers, chief economist at Briefing.com, a consulting firm in Boston. ``The business investment issue is hurting the labor market.''
The insured unemployment rate rose to 2.8 percent from 2.7 percent. That measure of the number of people receiving benefits as a share of those employed tends to move with the overall jobless rate, which held at 5.9 percent in July, close to an eight- year high of 6 percent reached in April.
Claims may also rise in the next two months as Ames Department Stores Inc. closes 327 stores, putting 21,500 people out of work. |
