Report: Manufacturing Activity Drops In June

Federal Reserve says industrial production edged up 0.1 percent, but manufacturing activity...

WASHINGTON (AP) -- Industrial production edged up 0.1 percent, but manufacturing activity dropped amid fears that the economic recovery is stalling.

The Federal Reserve says output at the nation's mines and utilities rose in June, offsetting the loss of factory output. It was the fourth straight monthly increase for overall production.

Output has not showed a single monthly decline in the past year. February's result was revised upward in Thursday's report. The Fed now says production was flat that month despite winter storms that shuttered some factories.

Utility output rose in June as hot weather spurred demand for electricity. Mines produced more coal and natural gas.

"The gain was all due to a weather-related ... jump in utilities output," said Paul Ashworth, senior U.S. economist at Capital Economics. "It was unseasonably warm across much of the Northeast last month, forcing people to crank up the air conditioning."

Yet weak manufacturing could mean a slower rebound. Manufacturing is the biggest component of production. Factories helped lead the economy out of the recession.

Economists expected the recovery to slow this quarter. But some fear the recovery will falter if unemployment remains near 10 percent.

High unemployment has stifled consumer spending. That could lead to another period of contraction if investors and businesses pull back as well.

The economy started growing again last summer, but factories are still operating at well below peak capacity. Factories were operating at 74.1 percent of their maximum output in June, the Fed said. The number was unchanged from the previous month.