Manufacturing flat in June because of weak autos

WASHINGTON — U.S. auto factories produced fewer goods in June than the previous month, and overall factory production was flat. It marked the third straight month of weak manufacturing output.

The Federal Reserve says factory production was unchanged last month following a tiny 0.1 percent rise in May. The May data were revised down from an initial 0.4 percent increase.

Auto production fell 2.0 percent in June, after declines of 0.3 percent in May and 6.6 percent in April. U.S. automakers are having trouble getting component parts because of supply chain disruptions stemming from the March earthquakes and tsunami in Japan. U.S. manufacturers in the auto and electronics industries depend on Japanese companies for component parts.

Overall industrial production was up 0.2 percent in June. The mining and utility sectors both showed gains, which offset the weak manufacturing reading.

Manufacturing has been a key driver of the economic recovery since the nation emerged from recession in June 2009.

U.S. factories have received a boost not only from rising domestic demand but strong growth in exports. The export gain has been helped by declines in the value of the dollar against many major currencies. The weaker dollar makes U.S. products more competitive in foreign markets.

Factory activity expanded at a faster rate in June than in May, according to the Institute for Supply Management's closely watched manufacturing index.

Still, the economy is growing at too weak a pace to drive down the high unemployment rate, which rose to 9.2 percent in June. Most economists forecast that growth was roughly 2 percent in the first half of the year.

The economy would need to grow 5 percent for a whole year to bring down the unemployment rate by one percentage point. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.