The economic recovery continues to be weak, as data released Tuesday show that the expansion of the nation's industrial sector slowed to a crawl in October.
Separate reports, meanwhile, showed that wholesale prices rose slightly in October and that home builders' confidence was unchanged from the previous month. Taken together, the three reports show just how tepid the economic recovery may turn out to be.
Industrial production rose 0.1 percent in October, the Federal Reserve said Tuesday, down from rates of expansion that had averaged 0.9 percent in the previous three months. And even that weaker-than-expected number was boosted by chilly fall weather, which led to a strong rise in output by utilities. Manufacturing output actually declined slightly, by 0.1 percent, which reflected in part automakers dialing back production after the expiration of the "Cash for Clunkers" program. Output of automobiles fell 1.7 percent after an 8.1 percent rise in September.
Those numbers signal that the burst of activity in the nation's factories that began over the summer has given way to a much more difficult slog out of recession.
"There's no reason to panic," said Paul Ashworth, senior economist at Capital Economics, saying the weak results could turn out to be more a blip than a trend. "But it is a timely reminder that it's not going to be a strong recovery, even in the industrial sector. It is a bit worrying to see that softness so early in the recovery."
With inventories lean and demand having stabilized, the nation's factories began expanding production in July, following a long decline. But they are still running far below their potential, with capacity utilization at 70.7 percent in October -- up from 70.5 percent in September and an all-time low of 68.3 percent in June.
The new data underscore worries that the recovery will prove to be slow, a reflection of the weak labor market and the continued stresses on American consumers that make them reluctant to buy big-ticket goods. That said, other recent indicators of the manufacturing sector give more reason for optimism, including a survey of manufacturing firms by the Institute for Supply Management, which showed continued solid expansion last month.
Also underscoring the weakness of the economy, the Labor Department reported that wholesale prices rose 0.3 percent in October, as measured by the producer price index, a bigger-than-expected increase. That, however, was driven by higher energy and food prices, which are volatile from month to month.
Excluding food and energy, wholesale prices were down 0.6 percent. That suggests that inflation will remain low, as companies will have little urgency to raise prices on their products given that costs for raw materials are not rising.
Low inflation is a key for the Federal Reserve as it aims to keep in place aggressive efforts to support the economy, and the producer price index did nothing to undermine expectations that the Fed will keep its target for interest rates near zero for many months. Wednesday, the Labor Department is scheduled to release its consumer price index, which is expected to show a 0.2 percent bump in consumer prices in October, 0.1 percent when food and energy are excluded.
Also Tuesday, the National Association of Homebuilders released its monthly survey of members, which showed that confidence among housing developers was unchanged in November. That suggests that the stabilization in the housing market that began over the summer may not be turning into sustained positive momentum.
"The challenges that builders are facing in obtaining credit for new housing production and appropriate appraisal values for their homes continued to worsen," said David Crowe, chief economist of the home builders association, in the report. "These issues still present a very worrisome problem that is weighing down prospects for a sustained housing market recovery."
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