Economy Factory output mostly weak in August outside autos Retail sales unchanged

By Daniel Wagner

AP Business Writer

WASHINGTON (AP) -- Manufacturing was mostly weak in August, a troubling sign for the economy. But auto production increased for the second straight month, as supply chains improved after months of delays caused by the Japan crisis.

Factory output rose 0.5 percent in August, after increasing 0.6 percent in July, the Federal Reserve said Thursday.

Nearly all of the gain came from a 2.6 percent rise in autos and related products, evidence that supply chain disruptions are easing. Still, the industry is producing less than it did before the March disaster.

Overall industrial production ticked up 0.2 percent. That was weaker than July's 0.9 percent increase.

In addition to autos, furniture makers and mines also showed strength. Factories that make textiles, chemicals and paper products produced less.

Separately, regional surveys showed that manufacturing continued to weaken in the Northeast and Mid-Atlantic area.

The Federal Reserve Bank of New York said factory conditions in that region worsened for a fourth straight month, according to its September survey. Businesses saw fewer new orders and paid higher prices. Factories in the region employed fewer people and their remaining employees worked fewer hours, the New York Fed said.

The Federal Reserve Bank of Philadelphia said manufacturing in that region shrank in September for the third time in four months.

U.S. manufacturing has been one of the strongest sectors of the economy since the recession ended. But it slowed this year, in part because of the supply chain disruptions but also because consumers have grown more cautious.

"The August report on industrial production showed that the U.S. manufacturing sector is at a crossroads, caught between a production rebound from the Japanese earthquake and the worrisome slowing of U.S. and global economic activity," said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI.

Retail sales were unchanged in August from July, the government said Wednesday. Consumers spent less on autos, clothing and furniture.

Analysts said Hurricane Irene likely disrupted sales along much of the East Coast. But many consumers pulled back after a series of events that suggested the economy was at risk of another downturn.

The government reported that the economy barely grew in the first half of the year. Lawmakers fought over raising the debt ceiling. Standard & Poor's downgraded long-term U.S. debt for the first time. Stocks tumbled -- the Dow lost nearly 16 percent of its value from July 21 through Aug. 10.

As a result, consumer confidence fell in August to its lowest level since April 2009, when the economy was still in recession. And employers added no net jobs during the month.

Europe's financial problems also threaten U.S. manufacturers. Sales to Europe account for about a quarter of U.S. companies' revenue, analysts say. If Europe tips back into recession, demand for their products would decline.

The overall production number was hurt by a 3 percent decline in output by utilities.

Published: Fri, Sep 16, 2011