By Bob Willis
Aug. 15 (Bloomberg) -- Industrial production in the U.S. probably stalled in July as slumping consumer and business spending prompted factories to cut back, economists said before reports today.
Output was unchanged after rising 0.5 percent in June, according to the median forecast of economists surveyed by Bloomberg News. Other reports may show consumers turned less pessimistic this month and manufacturing continued to stumble.
The worst housing slump in a quarter century has prompted banks to restrict lending, signaling sales will continue to weaken. Combined with indications that growth overseas is also slowing, the decline in demand means factory firings and shutdowns will intensify and the economy will keep struggling.
``Manufacturing will continue to face headwinds in the third quarter,'' said Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania. ``The global economy is showing signs of stalling, which will hurt.''
The Federal Reserve's production report is due at 9:15 a.m. in Washington. Economists' projections ranged from a decline of 0.5 percent to a gain of 0.4 percent.
Capacity utilization, which measures the proportion of plants in use, is forecast to fall to 79.8 percent from 79.9 percent, according to the survey median.
Economists track plant operating rates to gauge factories' ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher. The utilization rate has averaged 81 percent over the past 30 years.
New York Factories
At 8:30 a.m., the Fed Bank of New York's Empire State index is forecast to show manufacturing in that region contracted in August for the sixth time in seven months, according to economists surveyed.
The Reuters/University of Michigan preliminary survey on consumer confidence for August, due around 10:00 a.m., may show sentiment rose for a second month after reaching a 28-year low in June, the survey showed.
The production figures are likely to reinforce other reports that have indicated manufacturing stagnated. The Institute for Supply Management's factory index fell to 50 in July, the dividing line between expansion and contraction.
The auto industry is at the forefront of the manufacturing slump. Sales of cars and light trucks in July slid to a 12.5 million annual rate, the lowest level since 1993, according to industry figures.
Auto Inventories
With sales falling, General Motors Corp. and Ford Motor Co., the two largest U.S. carmakers, have cut output of SUV's, pickup trucks and other models as they clear inventories that swelled as demand fell.
``We're in a very difficult economic environment,'' GM Chief Executive Officer Rick Wagoner said in an interview Aug. 1 in Detroit. The company is expanding early-retirement programs, cutting output and staff to lower costs.
One reason manufacturing hasn't suffered even more is that exports have been growing. Now, even that support is in question.
Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, the European Union announced this week. Japan's economy also contracted last quarter as consumers spent less and exports fell, the government said on Aug. 13.
The U.S. economy, the world's largest, will grow at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to the median forecast of economists surveyed by Bloomberg this month.
Bloomberg Survey
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Empire Ind. Cap.U of Mich
Manu. Prod. Util. Conf.
Index MOM% % Index
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Date of Release 08/15 08/15 08/15 08/15
Observation Period Aug. July July Aug. P
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Median -4.2 0.0% 79.8% 62.0
Average -4.3 0.0% 79.8% 61.9
High Forecast 0.0 0.4% 80.4% 69.0
Low Forecast -11.0 -0.5% 79.3% 56.0
Number of Participants 50 78 67 63
Previous -4.9 0.5% 79.9% 61.2
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4CAST Ltd. 0.0 0.1% 79.9% 62.5
Action Economics -2.0 0.1% 79.8% 63.0
AIG Investments 0.0 -0.3% --- 61.0
Allianz Dresdner Economic --- 0.2% 79.9% ---
Argus Research Corp. -5.0 0.2% 80.1% 62.5
Banc of America Securitie --- 0.1% 79.8% ---
Bank of Tokyo- Mitsubishi -1.7 0.0% 79.7% 64.5
Bantleon Bank AG -6.0 -0.1% --- 62.5
Barclays Capital -3.0 0.0% 79.9% 62.0
BBVA -8.0 0.0% 79.7% 56.0
BMO Capital Markets -6.0 0.0% 79.7% 61.0
BNP Paribas -10.0 -0.1% 79.7% 67.0
Briefing.com --- 0.1% 79.9% 63.0
Calyon -4.4 -0.1% 79.8% 61.7
CFC Group -4.0 -0.1% 79.7% 60.0
CIBC World Markets --- -0.2% 79.6% 60.0
Citi --- 0.3% 80.4% 62.5
ClearView Economics --- 0.1% 79.8% ---
Commerzbank AG -6.0 -0.2% 79.7% ---
Credit Suisse --- 0.2% 79.9% 69.0
Daiwa Securities America --- 0.1% --- ---
Danske Bank --- 0.1% --- 61.8
DekaBank -2.0 0.1% 79.9% 63.0
Desjardins Group -4.5 0.2% 79.8% 61.7
Deutsche Bank Securities -9.0 -0.1% 79.4% 58.0
Deutsche Postbank AG --- 0.2% --- 62.0
Dresdner Kleinwort -9.0 0.1% 79.7% 59.0
DZ Bank -4.5 -0.1% 79.8% 60.0
First Trust Advisors -2.0 -0.1% 79.7% 62.0
Fortis -2.0 -0.2% --- 63.0
FTN Financial --- 0.1% 79.5% 59.0
GCI Capital -4.0 --- --- ---
Global Insight Inc. --- -0.2% --- 61.0
Goldman, Sachs & Co. --- -0.1% 79.7% ---
H&R Block Financial Advis -6.0 -0.2% 79.7% 61.5
Helaba -7.0 -0.1% 79.7% 62.0
Horizon Investments -5.0 -0.1% --- ---
HSBC Markets -2.0 0.0% 79.8% 63.0
IDEAglobal -3.0 0.1% 80.0% 62.0
Informa Global Markets -6.0 -0.1% 79.5% 61.5
ING Financial Markets -5.2 -0.2% 79.6% 60.0
Insight Economics -7.0 -0.2% 79.5% 62.5
Intesa-SanPaulo -11.0 -0.1% 79.4% ---
J.P. Morgan Chase -5.0 0.2% 79.9% 62.0
Janney Montgomery Scott L --- -0.2% 79.7% ---
JPMorgan Private Client --- -0.2% 79.6% 63.0
Landesbank Berlin --- -0.5% 79.4% 57.0
Landesbank BW -4.0 -0.1% 79.7% 62.5
Lehman Brothers -6.0 -0.2% 79.6% 62.0
Lloyds TSB -3.5 -0.2% 79.8% 63.5
Maria Fiorini Ramirez Inc --- 0.0% 79.8% 62.0
Merk Investments -1.0 0.0% 79.8% 62.0
Merrill Lynch -1.0 -0.5% 79.3% 60.0
MFC Global Investment Man --- -0.2% 79.6% 60.5
Moody's Economy.com -4.5 0.0% 79.8% 67.0
Morgan Keegan & Co. --- 0.2% 79.9% ---
Morgan Stanley & Co. --- 0.0% 79.8% ---
National Bank Financial --- -0.2% 79.7% 62.0
National City Corporation -3.1 0.1% 79.9% 63.4
Natixis --- -0.1% --- 62.5
Nomura Securities Intl. -5.0 0.1% 79.9% ---
Nord/LB 0.0 -0.2% 79.6% 62.0
PNC Bank --- 0.4% 80.1% ---
RBS Greenwich Capital --- 0.2% 80.0% 60.0
Ried, Thunberg & Co. -4.0 0.2% 79.9% 62.0
Schneider Trading Associa -1.8 -0.2% 79.6% 64.0
Scotia Capital --- -0.1% 79.5% ---
Standard Chartered -6.0 0.0% 79.7% 61.2
Stone & McCarthy Research -4.4 -0.1% 79.7% 60.0
TD Securities -5.0 0.0% 79.8% 63.0
Thomson Financial/IFR -2.5 0.1% 79.9% 62.0
UBS Securities LLC -4.0 0.2% --- 63.0
Unicredit MIB --- 0.3% 79.9% 63.0
University of Maryland --- 0.1% 79.9% 62.0
Wachovia Corp. --- 0.1% 79.8% ---
Wells Fargo & Co. --- 0.1% 79.8% 62.0
WestLB AG -4.0 0.0% 79.8% 62.0
Westpac Banking Co. -3.0 -0.1% --- 59.0
Wrightson Associates -4.0 0.2% 79.9% 62.0
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To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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