Industrial production in the U.S. rose less than forecast in June, restrained by declines in the output of autos and business equipment. The 0.2 percent increase in production at factories, mines and utilities followed a revised 0.1 percent decrease the prior month that was initially reported as a gain, figures from the Federal Reserve showed today. Economists projected a 0.3 percent rise in June, according to the median estimate in a Bloomberg News survey. Factory production was unchanged last month, while utility use rebounded. Manufacturing, which accounts for about 12 percent of the economy, may be restrained by slower consumer demand and a buildup in inventories. The figures underscore comments this week by Federal Reserve Chairman Ben S. Bernanke that the recovery “still needs a good deal of support.” “We don’t see much upward traction,” Sean Incremona, a senior economist at 4Cast Inc. in New York, said before the report. “Because of the soft-demand outlook, there doesn’t seem to be much need to produce to restock inventories. We’re still working through the soft patch.” Other figures from the Fed today showed manufacturing in New York state unexpectedly contracted for a second straight month in July. The so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut, rose to minus 3.8 from minus 7.8. Readings less than zero signal contraction. The Labor Department said today that the consumer-price index decreased 0.2 percent in June. The so-called core measure, which excludes more volatile food and energy costs, rose 0.3 percent. Range of Forecasts Forecasts for industrial production in June ranged from a drop of 0.2 percent to a gain of 0.7 percent, according to the Bloomberg survey of 80 economists. Production of automobiles and parts fell 2 percent, the Fed report showed. Excluding autos, manufacturing rose 0.2 percent after a 0.1 percent rise. Business equipment production declined 0.7 percent in June following a 1.2 percent increase. Output of computers and electronic products slumped 0.7 percent after a 0.6 percent gain. Furniture production dropped 2.1 percent last month. Capacity utilization, which measures the amount of a plant that is in use, held at 76.7 percent in June. The gauge compares with the average of 79.5 percent over the past 20 years. Mining production, which includes oil drilling, increased 0.5 percent. Utility output climbed 0.9 percent after a 2 percent drop. The average temperature was 70.7 degrees Fahrenheit (21.5 Celsius) last month, the 26th warmest June in 117 years, according to the National Climatic Data Center. Vehicle Assemblies Motor-vehicle assemblies decreased to 7.8 million units at an annual rate in June, the lowest this year, today’s report showed. The Fed said in its release that supply chain disruptions following the earthquake in Japan in March curtailed vehicle production as well as output in related industries. Cars and light trucks sold at an 11.4 million annual pace, down from 11.8 million annual rate in May and the lowest level in a year, according to researcher Autodata Corp. Some of the drop in demand last month reflected a shortage of Japanese-made vehicles after the earthquake and tsunami disrupted supplies. With inventories running low, companies offered smaller discounts, which also deterred buyers. Toyota Motor Corp. and Honda Motor Co.’s U.S. deliveries each fell 21 percent in June from a year earlier, while General Motors Co. and Ford Motor Co. saw sales gain 10 percent, less than estimates, according to industry data on July 2. “When considering the headwinds that we faced this month, June was fairly decent, comparing it year-over-year,” GM’s vice president for U.S. sales Donald Johnson said on a conference call July 1. Recent Figures Recent data have pointed to slowing growth at factories and the economy. The Institute for Supply Management’s manufacturing index rose in June from the lowest level since September 2009, while overall job growth was the slowest in nine months. Manufacturing may benefit from growing overseas economies and a declining dollar. The dollar has declined 8.5 percent against the currencies of major trading partners in the past year, making American-made goods more attractive abroad. Midland, Michigan-based Dow Chemical Co. plans to add 6,000 jobs this decade, mainly in Michigan, Texas and Louisiana, Chief Executive Officer Andrew Liveris said in an interview July 8. Dow is “selling well” to overseas markets, he said. Smaller U.S. companies with a regional focus aren’t doing as well, Liveris said. The path of economic recovery is “jagged, somewhere between “anemic” and “robust,” he said. The U.S. economy began 2011 on a weaker note, growing at a 1.9 percent annual rate in the first three months of this year after expanding at a 3.1 percent pace in the fourth quarter, according to Commerce Department figures. To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Source