Factory output up on truck, plane demand

WASHINGTON -- U.S. factories produced more goods in September for a third straight month, the latest signal that the economy is rebounding from its summer slump.

They made more airplanes, trucks and home electronics last month to meet rising demand, the Federal Reserve said yesterday.

The 0.4 percent increase in factory output followed other promising signs in September.

Hiring increased slightly, and retail sales grew by the most in seven months.

Economists say the brighter data suggest the July-September quarter is shaping up to be better than first thought.

While few are predicting the kind of steady growth needed to significantly lower the unemployment rate, many are less convinced that the economy is on the verge of another recession.

"After taking such an amazing punch to the gut in August, the U.S. economy across the board seems to have rebounded well in September," said Ellen Zentner, an economist with Nomura Securities Inc.

Overall industrial production edged up 0.2 percent last month after being unchanged in August. Utility output decreased sharply, while mines continued to produce more.

Auto output increased for a third straight month, home electronics production for a fifth.

Zentner said yesterday's report supports her forecast that the economy grew at an annual rate of 2.7 percent in the third quarter. That's well above the 0.9 percent growth in the first half of the year, the weakest since the recession officially ended more than two years ago.

Strong demand for business equipment matched other reports that showed companies are sticking with their investment plans, despite slow growth and weak consumer spending.

In August, businesses ordered more machinery, computers and communication equipment, and shipments of those products also increased, the government said last month.

A separate regional survey from the Fed yesterday showed that manufacturing in the Northeast region continued to contract. But many economists played down the overall decrease, largely because measures of new orders, shipments and hiring all turned from negative to positive in the October survey.

Manufacturing played a crucial role in the early stages of the recovery.