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Inventories Rise 0.1 Percent

Updated:
WASHINGTON (AP) — Industrial production fell in October, the second decline of the year. Output at factories was flat and production at utilities dropped sharply as unusually warm weather depressed demand.

The Federal Reserve reported Wednesday that output at the nation's factories, mines and utilities declined by 0.1 percent last month, following a moderate 0.4 percent increase in September.

The only other decline this year in industrial production was in July, 0.2 percent.

The latest snapshot of industrial activity — along with another report Wednesday showing a small increase in business inventories — is consistent with other data showing that the economy's red-hot growth from earlier in the year is cooling.

Output at factories was flat in October following a solid 0.5 percent rise the month before. Production declined for big-ticket consumer goods, in large part reflecting a drop in the output of automotive products, the Fed said. The production of household appliances also fell sharply.

``Production of cars, SUVs and minivans has been cut back significantly as producers have worked to bring inventories back in line with slower sales,'' said First Union economist Mark Vitner.

On Wall Street, stocks were holding on to moderate gains at midday. The Dow Jones industrial average was up 70 points and the Nasdaq index was up 33 points.

Production at gas and electric utilities fell 1.9 percent in October after a strong 0.9 percent increase in September, reflecting the impact of warmer-than-usual weather.

However, mining output rose 0.7 percent, following a 1.0 percent drop, boosted by increases in coal mining and in oil and gas drilling.

Meanwhile, operating capacity fell to 82.1 percent in October, below levels usually associated with a pickup in inflation.

In another report, inventories at U.S. companies edged up in September, posting the smallest gain since the beginning of 1999, while sales rose modestly.

Stockpiles of goods on shelves and backlots nationwide rose just 0.1 percent in September to a seasonally adjusted $1.21 trillion after posting a solid 0.7 percent increase in August, the Commerce Department reported.

The advance, the smallest since January 1999 when inventories rose by an identical amount, was weaker than the 0.3 percent rise many analysts were expecting.

At the same time, businesses' sales rose for the second consecutive month by 0.4 percent, pushing September's sales to $905 billion.

The inventory-to-sales ratio, which measures how long it would take for a company to exhaust its inventories, fell to 1.33 months in September from 1.34 months in August. The ratio had fallen to a record low of 1.31 months in March.

The Federal Reserve has boosted interest rates six times since June 1999 to slow the pace of economic growth and its main engine, consumer spending, which would serve to keep inflation in check.

Retailers' inventories fell by 0.1 percent to $391.5 billion in September, after a strong 1.4 percent gain in August. Sales, however, rose by a sizzling 0.9 percent to $273 billion in September, after being flat in August.

Wholesalers increased their inventories by 0.2 percent to $326.7 billion, down from a 0.6 percent gain the month before. Sales at wholesalers in September, rose by a solid 0.7 percent to $251.6 billion after a 0.2 percent gain in August.

Factory inventories rose by 0.2 percent to $488.5 billion, down slightly from a 0.3 percent rise. Manufacturers' sales fell 0.1 percent in September to $380.4 billion. In August, factory sales grew by a strong 0.8 percent.

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On the Net:

Industrial production report: http://www.federalreserve.gov/releases/G17/Current/

Inventories report: http://www.census.gov/mtis/www/current.html
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