Factory Output Stalled; Unsold Inventory Piles Up

WASHINGTON — Output at the nation’s mines, factories and utilities barely crept ahead in April, the Federal Reserve Board said Friday, as a pileup of unsold goods crimped the pace of industrial activity.

The Fed said industrial production edged up by 0.1% last month after being flat in March, when severe winter weather hampered activity ranging from home building to coal mining. Factories ran at 81.4% of capacity in both March and April.

A buildup of inventories during March, caused partly by the bad weather that kept shoppers at home, played a role in dampening new orders for factories.

The Commerce Department reported separately that inventories piled up in March at the fastest rate in nearly four years, growing by 0.8% to a seasonally adjusted value of $861.1 billion.

The last time unsold goods grew at a faster clip was before the last recession, in May, 1989, when they were up by 0.9%, department officials said. Inventories were higher at every level of business from manufacturing through wholesaling to retail stores.

Total business sales in March increased by an anemic 0.2% to a seasonally adjusted $586.5 billion after a 0.6% February gain.

“We’ve had a very significant buildup of inventories at the retail and wholesale level, and that cut orders to manufacturers as we already saw in the purchasing managers’ report for April,” said economist Lynn Reaser of First Interstate Bancorp in Los Angeles, referring to a recent report.

The slowdown at the factory gate means job creation will likely remain weak. But it might also take some pressure off price rises that showed up at the wholesale and retail level in April and set off inflation alarms, Reaser noted.

“The slight increase in industrial production indicates that the economy continues to grow at a snail’s pace,” Washington-based economic consultant John Albertine said.

The latest University of Michigan survey of economic confidence, released to paying clients Friday, showed a deterioration to 81.9 in early May from an average of 85.6 in April.

That is not a promising indicator because consumer purchases of goods and services are the fuel for two-thirds of national economic activity.