WASHINGTON — Industrial activity edged up by 0.1 percent in August as declines in utility and mining output tempered a gain in factory production.

The small rise in industrial activity reported by the Federal Reserve Wednesday followed a 0.6 percent gain in July.

Although economists were forecasting a 0.5 percent gain for August, some analysts said the report was not as weak as the overall number seemed to suggest. Those analysts took comfort in the fact that manufacturing output grew.

"The report is stronger than appears on the surface. Unlike other parts of the economy, manufacturing activity moved up, so I would say in general this is a pretty solid report," said Stuart Hoffman, chief economist at PNC Financial Services Group. "Utility output was down probably because of the relatively cool summer we had."

On Wall Street, the Dow Jones industrials lost 86.80 points to close at 10,231.36. The lower-than-expected reading on industrial production along with gloomy forecasts issued by Coca-Cola Co. and several other companies rattled investors.

Federal Reserve Chairman Alan Greenspan, appearing before Congress last week, said economic activity hit a "soft patch" in late spring, which he said was related in large part to high energy prices. But he added at the time that there were some signs the expansion has "regained some traction," such as a pickup in the nation's payrolls in August.

The Fed's report showed that mining production dropped by 1.1 percent in August, compared with a 1.3 percent gain in July. Output at utilities declined by 2.4 percent in August, following a 2 percent decline.

At the nation's factories, however, output rose by 0.5 percent in August, after a 0.9 percent advance the previous month.

Meanwhile, businesses saw their inventories rise in July as sales picked up, according to the Commerce Department.

It said that stocks of unsold goods increased by 0.9 percent in July, down from a 1.1 percent rise in June. Sales, meanwhile, rose by 0.6 percent in July — three times the 0.2 percent increase registered in the previous month.

Economists say it is sometimes difficult to divine whether companies are adding to inventories because they anticipate stronger demand from customers or if inventories are rising because demand is lackluster.

Greenspan said last week that he had seen signs that the economy has recently regained some of its earlier strength.

Against that backdrop, many economists believe the Fed will boost short-term interest rates for a third time this year when they meet next week. That would push up a key rate from 1.50 percent to 1.75 percent. Economists say rates are still low by historical standards and that the rates gradually need to rise to help protect the economy against unwanted inflation.