Good News: Manufacturing Output Up 0.6% in July

July's increase in the industrial production index was the largest since December 2010.

Industrial production rose 0.9% in July, the Federal Reserve reported on August 16.

Manufacturing output rose 0.6% driven by a 5.2% increase in motor vehicles and parts production.

"Further, the growth in manufacturing output in both May and June were revised upward," said Don Norman, economist for the Manufacturers Alliance/MAPI. "Julys increase in the industrial production index was the largest increase since December 2010.

"For manufacturing, the increase was the largest since March 2011. The rise in manufacturing production was led by a jump in motor vehicle production which in part, reflects the easing of supply chain problems associated with the earthquake and tsunami in Japan. Excluding the increase in motor vehicle production, manufacturing production increased by 0.3%. The increase in overall industrial production index also reflects a 2.8% increase in output by utilities in response to the heat wave impacting much of the country.

"While motor vehicle production and output from utilities account for much of the improvement in the industrial production index, the expansion of manufacturing production was fairly widespread, with 14 of the 20 major manufacturing industries showing improvement from June to July," he added. "The growth of manufacturing production has decelerated this year, reflecting the marked slowdown in the economic recovery during the first seven months of 2011, but it clearly continues to expand and will likely outpace growth in GDP this year and next."

The capacity utilization rate for total industry climbed to 77.5%, a rate 2.2 percentage points above the rate from a year earlier but 2.9 percentage points below its long-run (1972--2010) average.

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