Industrial output rises by small amount

WASHINGTON - The nation's industrial output posted a modest increase in January but all of the strength came from a weather-related jump in output at utility companies. Analysts said the poor performance was the latest sign that the economy has slowed significantly in recent weeks.

The Federal Reserve reported Friday that industrial production rose by 0.1 percent in January, a weak showing that matched the December increase and was in line with expectations.

But all of the strength came from a big 2.2 percent rise in output to heat homes and businesses as cold weather returned following a milder-than-normal December when utility output had fallen by 0.2 percent. In contrast, manufacturing output was flat - the poorest showing in three months as factories were feeling the effects of a slowdown that has raised worries the country is slipping into a recession.

Output fell by 1.3 percent at auto plants as the industry continued to struggle with weak demand in the face of higher gasoline prices and the sluggish economy. Output also fell at factories making wood products and furniture, sectors that have been hit hard by the prolonged slump in housing.

Otherwise, output was up at factories producing computers, electronic products and aerospace equipment. It was down 1.8 percent in mining, a category that includes coal production and oil exploration.

Analysts said manufacturing would have been in even worse shape had it not been for declines in the value of the dollar against other currencies, which has helped to give a significant boost to export sales.

'The only reason that the manufacturing sector is not in a sharp decline is that the decline in the value of the dollar has made U.S. exports very competitive in the world market again,' said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI. 'Surging exports are cushioning the domestic weakness.'

Analysts cautioned that manufacturing is likely to lag for the next six months because of an expected sharp slowing in consumer spending, which accounts for two-thirds of total economic activity. Another report Friday showed that the University of Michigan survey of consumer confidence fell sharply - to a reading of 69.6 in mid-February - the lowest in 16 years as consumers struggled with a host of problems ranging from the severe housing slump to tighter credit, a weakening job market and falling stock prices.

'Consumers are pulling back on spending and consumer sentiment continues to nosedive,' said Brian Bethune, senior economist at Global Insight, a private forecasting firm.