By Shobhana Chandra Aug. 17 (Bloomberg) -- Industrial production and housing starts probably rose in July from depressed levels the prior month as the U.S. struggled to sustain the recovery, economists said before reports today. Output increased 0.5 percent, according to the median estimate of 73 economists surveyed by Bloomberg News, led by a rebound in auto making as fewer plants closed for mid-year retooling. Other reports may show work began on more houses for the first time since April and inflation was contained. Manufacturing, which led the economy out of the worst recession since the 1930s, may cool as a slowdown in consumer spending restrains orders, while mounting foreclosures and a lack of jobs hold back housing. Weaker-than-forecast sales at Cisco Systems Inc. may be the first sign that business investment, another pillar of growth, is also decelerating. “It’s a picture of a subdued recovery,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York. “Manufacturing will settle into a slower pace of expansion in line with final demand that’s pretty soft.” The Federal Reserve’s production figures are scheduled for 9:15 a.m. in Washington. Economists’ estimates ranged from no change to a 1.2 percent increase. Total output climbed 0.1 percent in June as soaring temperatures boosted utility use, masking the biggest decrease in manufacturing in a year. The Commerce Department’s homebuilding report at 8:30 a.m. may show housing starts climbed to a 560,000 annual rate last month from a 549,000 pace in June that was the lowest in eight months, according to the survey median. Estimates ranged from 525,000 to 615,000. Wholesale Prices Also at 8:30 a.m., Labor Department data is projected to show the producer price gauge rose 0.2 percent last month, the first increase since March, according to the survey. Automakers kept factories open last month as they recovered from the recession. Chrysler Group LLC slashed production by half in 2009, and General Motors Co. cut output by 44 percent as the companies went through bankruptcy and extended summer plant shutdowns. Ford Motor Co., the only major U.S. automaker to avoid bankruptcy, lowered output 16 percent, according to J.D. Power & Associates. This year, GM kept most of its U.S. plants open during the traditional shutdowns, a move that economists said propelled auto output last month. At the same time, automakers aren’t going to charge ahead in coming months. Dearborn, Michigan-based Ford has no plans to increase production of any of its current models because demand is fragile in the weak economic recovery, George Pipas, the automaker’s sales analyst, said in an interview this month. ‘Mixed Signals’ Cisco, the world’s largest maker of networking equipment, last week forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy. Still, “we’re not making a call on the economy going down,” Chambers said Aug. 11 on a conference call. “I think the probabilities on a double dip, or whatever you want to call it, are relatively low.” Shares of manufacturers have held up better than the broader market since evidence mounted that the world’s largest economy was cooling. The Standard & Poor’s Supercomposite Machinery Index, which includes Deere & Co. and Caterpillar Inc., has climbed 10 percent since the end of June, compared with a 4.7 percent gain in the S&P 500 Index. President Barack Obama is trying to boost manufacturing and spur job creation through his goal to double U.S. exports during the next five years. Fed Action Fed policy makers, who on Aug. 10 renewed a pledge to hold interest rates near zero, said they will maintain their holdings of securities to prevent money from being drained out of the financial system, their first attempt to bolster the economy in more than a year. “The pace of recovery in output and employment has slowed in recent months,” central bank officials said in a statement following their meeting. The “economic recovery is likely to be more modest in the near term than had been anticipated.” Today’s housing report may show building permits, a gauge of future construction, fell 0.9 percent to a 578,000 annual pace, economists predicted. The end of a government tax incentive, for which buyers had to sign purchase agreements by April 30 in order to qualify, has caused swings in housing data. It will take several months for the effect to work its way out of the numbers, economists said.

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