GM strikes curb output in July; drought lifts wholesale prices

WASHINGTON The General Motors strikes propelled the worstback-to-back declines in the nation's industrial production in nearlyeight years while drought pushed up food prices in July.

Prices charged by producers such as factories andfood-processing plants rose 0.2 percent, driven by a drought-inducedjump in vegetable prices, the Labor Department said today.

"With Asia down for the count and much of the rest of the worldwobbling, this comes as no surprise," said economist Oscar Gonzalezof John Hancock in Boston. "This means U.S. consumers will continueto benefit from low inflation."

Meanwhile, the GM strikes caused production at factories, minesand utilities to fall 0.6 percent last month, the second consecutivedecline, the Federal Reserve said.

Motor vehicle output dropped from an annual rate of 12.4 millionin May to 8.3 million in July. Excluding autos, industrialproduction would have edged up in July after declining 0.4 percent inJune, the Federal Reserve said.

In a third report, the Commerce Department said businessinventories rose 0.1 percent in June after no change in May.Businesses are keeping a tighter rein on their stocks of unsoldgoods, which shot up in earlier months.

Automobile inventories fell 3 percent in June, the biggest dropsince 1991 and a reflection of the GM strikes, which were settled atthe end of the month.

Though modest, the overall seasonally adjusted increase in theLabor Department's Producer Price Index for finished goods was morethan analysts were expecting. Nevertheless, it followed a 0.1percent decline in June and, for the first seven months of the year,the index fell at a 0.3 percent annual rate.

Deflation in goods prices - stemming in part from the fallingcost of imports from economically troubled Asia - is helping to keepa lid on inflation. Service costs - not measured in today's report -are rising more quickly, reflecting labor shortages.