U.S. Industrial Production Sees Modest Jump

WASHINGTON (AP) — Industrial production likely rose modestly in August as lower output at auto factories offset other gains.

Economists expect that production at the nation's factories, mines and utilities grew 0.2 percent last month after a 1 percent rise in July. Unusually hot weather and strong initial manufacturing data suggest the number remained positive. But auto production probably fell after July's 9.9 percent jump. The sector's weakness would drag down the overall number.

The Federal Reserve will release the report at 9:15 a.m. Wednesday.

Last month, industrial production rose mostly on the strength of the auto industry. Factory production, the largest single element of industrial production, rose 1.1 percent.

The gains without autos were more measured. Manufacturing activity excluding autos grew by 0.6 percent in July. Economists expect the result in August will be similar, or a bit weaker.

That would confirm the broader economic trend: The recovery is continuing, but remains painfully slow.

Last summer, the nation emerged from the deepest recession since the Great Depression. Since then, manufacturing has helped drive the recovery. Business spending on machinery and equipment has driven much of that demand.

The economy has lost some momentum in recent months. Businesses spent less on equipment and to restock inventories that they drew down during the recession.

Consumers been unable to replace that demand. Unemployment remains high. Wages are flat. Americans are saving more, while spending and borrowing less.

Economists already expected growth to slow in the third quarter as temporary government spending programs ended. A key tax credit for first-time homebuyers expired, dousing any activity in the housing market.

Yet recent data suggest the economy is still growing — albeit at a slower pace. Retail sales rose in August by the largest amount in five months, the Commerce Department said Tuesday. Commerce reported separately that business inventories jumped in July. That means some companies are still buying factory goods.

Auto sales were a major weakness in Tuesday's report. They fell 0.7 percent, confirming earlier reports that August was the auto industry's worst month for sales since 1983. General Motors, Toyota, Honda and Ford all reported declines last month compared to July and also compared to August 2009.