Industrial production rises 0.2 percent in August

WASHINGTON (AP) - Production at U.S. factories grew in August for the 12th time in 14 months, but at a slower rate than earlier this year as consumers spent cautiously.

Overall output at the nation's factories, mines and utilities edged up 0.2 percent last month, the Federal Reserve reported Wednesday. It rose 0.6 percent in July.

Production gains at factories, the largest single element of industrial production, slowed to 0.2 percent after rising 0.7 percent in July. Much of the softness came from a decline in auto production, which spiked in July. Excluding autos, manufacturing output rose 0.5 percent.

Production rose for basic consumer goods such as food, clothing and paper by more than 1.0 percent. Factories produced 0.7 percent more business equipment in August.

Manufacturing has helped drive economic expansion over the past year. Companies built up their stockpiles in the first half of the year after slashing them during the recession.

But factory output has slowed in recent months. Businesses are no longer rebuilding their inventories. At the same time, demand for goods remains weak because consumers are saving more and spending with caution.

The economy could suffer if industrial production gains get any smaller, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. He said output is probably rising at a 5 percent annual rate this quarter, compared to 7.2 percent in the first quarter and 6.5 percent in the second.

"You don't want it to go much below where it is right now," LaVorgna said. "If you go down to 1 or 2 percent, there's not much buffer between that and economic contraction."

Still, LaVorgna said he expects the economy to keep growing slowly as financial markets strengthen and consumers grow more confident.

The nation's factories were operating at 74.7 percent of their capacity, up 0.1 percent from July. That's still well below the average since 1972 of 80.6 percent.

Production at mines grew 1.2 percent. The nation's mines are operating at 86.3 percent of their capacity, just 1.1 percent below the average since 1972. Utility production fell by 1.5 percent.