Production at the nation's factories, mines and utilities rose a scant 0.2 percent in April, following steep declines in the previous two months, as stronger activity in the automobile industry boosted output, the Federal Reserve Board reported yesterday.
While automobile production increased, most other industries showed little change, the Fed said. Oil and gas drilling activity continued to decline, the Fed said.
"I think this report still gives a generally sluggish picture, and I think we're going to get better reports in the coming months," said Robert Ortner, the Commerce Department's chief economist. The manufacturing sector hasn't yet seen the benefits of reduced interest rates, lower oil prices and a falling dollar, he said.
Ortner said the economy probably will grow at a slower rate in the second quarter than the 3.2 percent rate in the first quarter because of the sluggishness in production, which accounts for about one-third of the nation's output.
The industrial-production report "reflects a part of the economy which has been particularly sluggish since the middle of 1984," Ortner said.
David Berson, senior economist for Merrill Lynch Economics, said that, despite the sharp increase in automobile production in April, auto makers already are beginning to cut their output. If the rest of the economy does not pick up production to offset lower auto output, the economy will remain sluggish, Berson said.
"I haven't seen other parts of the eonomy picking up yet," Berson said. "We're a couple of months away" from a rebound, he said. The manufacturing sector should begin to feel the effects of a lower dollar, which is expected to boost exports and reduce imports, by June or July, Berson said.
When the turnaround occurs, factories producing consumer goods should respond first, because consumers are expected to increase their spending as they reap the benefits of lower oil prices and reduced interest rates. Berson said.
"The economy is still weak," he said. "It's not all that strong a report."
Automobiles were assembled at an annual rate of 8.1 million units in April, an increase from the 7.7-million-unit rate in March, the Fed said. The production of all consumer goods rose 0.6 percent last month following three consecutive monthly declines.
Production at factories rose 0.5 percent last month after declines in February and March. Durable-goods proudction increased 0.7 percent and output of nondurable items increased 0.2 percent, the Fed said.
Mining production, which includes the faltering oil and gas industries, dropped 1.1 percent in April, following declines of 2.1 percent in March and 2 percent in February, the Fed said.
Output at utilities fell 0.1 percent in April after climbing 1.6 percent in March. Production of defense and space equipment rose 0.5 percent in April after declines in the beginning of the year.