Economy Factory output rises on truck, airplane demand

By Daniel Wagner AP Business Writer WASHINGTON (AP) -- Factory output rose for a third straight month in September, a sign the economy is growing slowly. Manufacturers made more airplanes, trucks and home electronics to meet rising demand. Output at U.S. factories increased 0.4 percent in September after gaining 0.3 percent in August, the Federal Reserve said Monday. Production of business equipment rose 1 percent, the third straight increase of 1 percent or more. Transit equipment and information processing equipment drove the gain. Auto output increased for a third straight month, home electronics production for a fifth. Overall industrial production edged up 0.2 percent. It was unchanged in August. Utility output decreased sharply, while mines continued to produce more. Stocks fell on Wall Street, mostly on concerns about Europe's ability to solve its debt crisis. The Dow Jones industrial average dropped more than 100 points in the first hour of trading. Broader indexes also declined. Industrial production has increased 12.8 percent since June 2009. It remains 5.8 percent below its recent peak, reached in September 2007. The rise in factory output, the largest component of industrial production, is the latest signal that the economy is recovering from its summer slump. The government has also said that hiring increased slightly in September and retail sales grew by the most in seven months. "The third quarter turned out to be a lot better than some feared and the economy has a little momentum going into the fourth," said Paul Ashworth, chief U.S. economist for Capital Economics. "Nevertheless, we're still more worried about the first quarter of next year, particularly if the temporary payroll tax reduction is allowed to expire at the end of this year." President Barack Obama continues to press Congress to pass pieces of his larger, now-defunct jobs bill. The broader legislation includes an extension of the Social Security tax cut, which put an extra $1,000 to $2,000 in Americans pockets this year. Strong demand for business equipment confirms signals that companies are sticking with their investment plans, despite slow growth and weak consumer spending. In August, businesses ordered more machinery, computers and communication equipment and shipments of those products also increased, the government said last month. A separate survey Monday showed that manufacturing in the northeast region continued to contract this month. But new orders, shipments and hiring all turned from negative to positive, leading many economists to downplay the overall decrease. The overall number is based on a separate question about general business confidence, making it less reliable than the individual components, said Ashworth. Manufacturing played a crucial role in the early stages of the recovery. Factories were among the first businesses to start growing after the recession officially ended in June 2009. However, manufacturing slowed this spring. Consumers cut back on purchases in the face of higher prices for gas and food. And the March earthquake in Japan disrupted supply chains, which slowed U.S. auto production. Manufacturers cut 13,000 jobs in September and 4,000 in August, according to government data. The average length of a factory worker's week declined as well. Strong export growth has helped manufacturers expand over the past two years. But shipments to overseas buyers might be hurt by the stronger dollar. A more powerful currency makes U.S. goods appear more expensive to foreign buyers. Slower growth in emerging markets also is reducing demand for U.S. factory goods, economists say. Published: Tue, Oct 18, 2011