U.S. Industrial Output Up 0.8% In June

By Agence France-Presse U.S. industrial output rose 0.8% in June in the sixth straight monthly increase and the largest rise since October 1999, the Federal Reserve said July 16. The report showed surprising strength in the industrial sector. Most economists expected an increase of about 0.5%. In May, industrial output rose a revised 0.4%, up from the previous estimate of a 0.2% rise. On a year-on-year basis, industrial production in June was up 0.2%. The rise in industrial output in June was widespread, with all main categories showing strength led by utilities and mining. The Fed also said U.S. industry operated at 76.1% of capacity in June, the highest rate of capacity use since August 2001. Manufacturing output rose by 0.7%. Economists said the rise in output was largely supported by robust auto production but gains in output were widespread across industry. Ian Morris, a U.S. economist at HSBC Securities in New York, said the report was "very strong" and largely fired by auto production and high-technology output which rose 2.5% and 1.7% respectively in June. "Both production and utilization have risen for six consecutive months, thereby suggesting that the recovery is becoming well and truly established," Morris said. "But given the recent weakness in stocks, the fear is that manufacturing will turn tip over in the second half of 2002." Morris explained that he believes output growth can remain positive, because manufacturing productivity remains exceptionally strong and profits are rising impressively, as long as equity markets do not continue to tumble downward. Other economists support Morris' outlook but said that despite the solid numbers seen in June's report, it still remains to be seen whether the data will be absorbed by the markets amid their current downturn. "Capital spending is beginning to stir," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., Valhalla, N.Y., an economic-data analysis firm. "In the second quarter as a whole, manufacturing output rose at a 4.1% rate, the fastest since the second quarter of 2000. There is more to come, but does anyone care?" Copyright Agence France-Presse, 2002

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