Industrial production rose 0.2 percent in September, the government reported yesterday, with a 7.5 percent spurt in automobile production masking manufacturing weakness.
The Federal Reserve report was "loaded by the motor vehicle numbers, which are unsustainable," contended Robert G. Dederick, chief economist for the Northern Trust Co. in Chicago. Excluding autos, the Fed said production dropped 0.1 percent.
At the same time, the central bank revised output figures for July and August to show the industrial economy was stronger than first reported last summer. Production in July was boosted from a flat figure to a 0.2 percent gain while August output was changed from a 0.2 percent decline to a 0.1 percent advance.
"There were a lot of questions about whether we were still growing in the third quarter," said David Jones, an economist with Aubrey G. Lanston & Co., a New York securities dealer. "What we had was an economy that was slipping into recession in slow motion." "We still feel that given the sharp deterioration in consumer and business confidence on the heels of the oil shock, the economy will show negative growth in the fourth quarter," he added.
The 7.5 percent gain in auto output, Jones said, resulted from "aggressive rebates that tend to steal from future demand." He noted that sales dropped from a seasonally adjusted annual rate of 8.2 million in the last 10 days of September, when incentives were offered, to 6.5 million in the first 10 days of October.
Production at manufacturing plants making both durable and nondurable goods rose 0.2 percent in September. But the Fed said, "apart from the sharp rise in motor vehicle assemblies, manufacturing output dropped 0.2 percent."
Indeed, "if you look at the components, the declines were fairly widespread," Dederick said.