Output at the nation's factories, mines and utilities rose 0.3 percent in August, the seventh consecutive monthly advance, the government said yesterday.
The Federal Reserve said the August increase was the smallest increase since a 0.1 percent rise in April. It followed much larger gains of 0.8 percent in July and 0.7 percent in both June and May.
Analysts said the moderate August increase showed the nation's industrial sector is still recouping losses inflicted over a two-year period by heavy competition from foreign-made products.
"The August rise in industrial production is very positive, coming after last month's big increase," said Allen Sinai, chief economist of Shearson Lehman Brothers in New York. "The industrial expansion is now widespread and appears to be taking on a life of its own."
The increase in industrial production in August was held back by an 11 percent drop in output of passenger cars. Autos were assembled at an annual rate of 5.9 million units in August, down from a July rate of 6.7 million units.
Auto makers have been forced to reduce output and reinstitute incentive sales programs in an effort to reduce a huge backlog of unsold cars. The result last month was a big gain in auto sales that produced the biggest increase in retail sales in six months.
The Commerce Department reported a 1.3 percent retail sales increase in August, but economists said yesterday that the strong auto sales, fueled by discounts, mask lackluster growth or declines in other areas.
The Commerce Department said retail establishments sold $128.6 billion worth of goods in August, up $1.6 billion from the July sales level after adjusting for seasonal variations but not for inflation.
It was the biggest monthly sales increase since a 4.8 percent jump last February and it followed revised increases of 0.5 percent in July and 1.2 percent in June.
Output at all U.S. manufacturing plants rose 0.3 percent in August, one-third of the 0.9 percent July increase. Production at factories making durable goods, items expected to last three or more years, was up 0.5 percent while output of nondurable goods edged up 0.1 percent.
Output of business equipment, which has grown rapidly this year, increased a sharp 1 percent in August