Industrial sector continues to rebound
WASHINGTON (AP) – The nation’s industrial sector continues to rebound after getting knocked down in last year’s recession. The Federal Reserve reported Tuesday that production at factories, mines and utilities increased for a sixth consecutive month, jumping by 0.8 percent in June, the largest monthly increase since October 1999. It was better than the 0.5 percent many analysts were expecting. Production of automobiles and parts, home electronics and computers and office equipment increased in June. Declines were reported in appliances, furniture and carpeting.
“Manufacturing activity is gaining momentum,” said Stan Shipley, senior economist with Merrill Lynch.
Industrial production in May was revised slightly higher to 0.4 percent instead of the 0.3 percent advance the Fed estimated a month ago. At factories alone, the sector also posted a sixth straight increase, rising 0.7 percent in June. Output at mines expanded 1.1 percent, and production by utilities increased 1.6 percent.
“The growth was widespread across manufacturing industries since 17 of the 20 major industries within the manufacturing sector experienced growth in June,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance. Also encouraging was the increase in business capital equipment and a 0.6 percent gain in communications equipment.
, an industry that had been shrinking, Meckstroth said.
In congressional testimony, Federal Reserve Chairman Alan Greenspan said Tuesday the economy is on the road to full recovery but remains hampered by the effects of last year’s recession and recent corporate accounting scandals.
“The effects of the recent difficulties will linger for a bit longer, but as they wear off, and absent significant further adverse shocks, the U.S. economy is poised to resume a pattern of sustainable growth,” Greenspan told the Senate Banking Committee.
Greenspan’s soothing words helped calm Wall Street, enabling the market to recover from sharp early losses and at least temporarily stabilizing after Monday’s volatility. In early afternoon trading, the Dow Jones industrial average was down 50 points after falling 232 points in early trading. The Nasdaq was up 6 points.
The behavior of consumers, whose spending accounts for two-thirds of the country’s economic activity, and businesses, whose deep cuts in capital investment helped push the economy into recession, will shape the recovery.
Some economists worry that higher unemployment, the wave of accounting scandals that has shaken confidence in corporate America and the sour stock market might dampen the willingness of consumers to spend and businesses to invest, which would further slow the recovery.
Citing worries about the strength of the rebound, the Federal Reserve has opted at each of its four meetings this year to leave short-term interest rates at 40-year lows. Growing numbers of economists believe the Fed might leave rates unchanged for the rest of the year.
Policy-makers said they hope low rates will encourage consumers to spend and businesses to invest, which would help the economy to rebound.
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On the Net: Industrial production report: http://www.federalreserve.gov
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