Bloomberg News

WASHINGTON - Federal Reserve reports issued Thursday offered seemingly contradictory signals on whether the economy has slowed down.

U.S. factories, mines, and utilities stepped up production in May, according to one report. Increased output of business equipment outweighed cooler demand for cars, appliances, and other consumer goods. Industrial production rose 0.4%, after 0.7% increases in April and in March.

Release of these data sent Treasury securities lower, as investors considered whether the had overestimated the economic slowdown.

But a regional Fed report pointed to slower growth in Philadelphia-area manufacturing. That reinforced evidence from recent reports that six Fed interest-rate increases in the last year are starting to cool the economy.

"There's no doubt we're seeing some moderation," said William Sullivan, an economist at Morgan Stanley Dean Witter in New York. "We've been going down the highway at 85 miles per hours, now we're slowing to 65, which is the speed limit."

Production of goods related to housing, autos, and other interest-rate sensitive industries fell, the Fed's industrial production report showed. Output of consumer goods - such as appliances, carpeting, and home electronic equipment - fell 0.1% and auto production fell 0.2%. Business equipment output rose 0.7%, led by a 4.4% rise in production of semiconductors.

"If they were to choose, the Fed would much rather see consumer demand cool and capital spending remain strong, because it boosts productivity," said John Ryding, a senior economist at Bear, Stearns & Co.

Reports over the last month showed that home and retail sales slowed and companies eliminated jobs in May. U.S. factory orders in April registered the biggest decline in almost a decade, and an industry survey last month showed manufacturing expanding at the slowest pace in more than a year.

Business at Philadelphia-area factories expanded in June at the slowest pace in almost two years, a report from the Philadelphia Fed Bank showed. New orders and shipments fell, as did the number of workers on manufacturing payrolls in that region.

The bank's general economic index - covering activity in eastern Pennsylvania, Delaware and southern New Jersey - fell to its lowest reading since November 1998.

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