Industrial Production Jumps on Auto-Parts Spike

Friday, 15 Aug 2014 10:02 AM

 

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U.S. factory output rose for the sixth consecutive month in July, led by a jump in the production of motor vehicles, furniture, textiles and metals.

Manufacturing production rose 1 percent in July compared with the prior month, the Federal Reserve reported Friday. Factory output in June was revised slightly higher to a 0.3 percent increase. Over the past 12 months, manufacturing has risen 4.9 percent.

Demand for autos surged 10.1 percent last month, the largest increase since July 2009. The broader increase in manufacturing points to stronger growth across the economy, suggesting that manufacturers expect the pace of business investment and consumer spending to improve in the coming months.

"Manufacturing will continue to add to the recovery throughout 2014 and into 2015," said Stuart Hoffman, chief economist at PNC Financial Services.

Overall industrial production, which includes manufacturing, mining and utilities, rose 0.4 percent in July, dragged down by a 3.4 percent drop in production at utilities.

Several other reports suggest that factory production improved this summer.

Manufacturers added 28,000 workers last month, according to the government's jobs report. That builds on the 23,000 employees that factories added in June, a sign that companies expect demand to continue its upward swing.

Separately, the Institute for Supply Management, a trade group of purchasing managers, reported that its manufacturing index climbed to 57.1 in July. That's the highest level since April 2011 and up from 55.3 in June.

Anything above 50 signals that manufacturing activity is growing.

The increase in the index led Paul Dales, senior U.S. economist at Capital Economics, to conclude that "manufacturing payrolls may soon start to rise by close to 50,000 a month."

Factory orders rose a seasonally adjusted 1.1 percent in June compared with the previous month, the Commerce Department reported Tuesday. Orders had fallen 0.6 percent in May after three straight monthly gains.

An 8.4 percent jump in demand for commercial aircraft drove much of the gain, yet orders also picked up for machinery, iron, steel, computers and electronics.

Rising factory output should help the current economic expansion to continue.

The U.S. economy shrank at a 2.1 percent annual rate in the first quarter, although it bounced back at an annual clip of 4 percent in the second quarter

Most analysts expect the economy to expand at a roughly 3 percent rate in the second half the year.

© 2014 Thomson/Reuters. All rights reserved.

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