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Manufacturing Output in US Increases by Most in Four Months

July 17, 2018
The latest results indicate a steady advance in the nation’s manufacturing sector.

U.S. factory production rebounded in June by the most in four months as the industry regained its footing after a fire-related disruption at an auto parts supplier, Federal Reserve data showed Tuesday.

Highlights of Industrial Production (June)

  • Factory output rose 0.8% (est. 0.7% gain) after falling a revised 1% (prev. 0.7% drop).
  • Total industrial production, which also includes mines and utilities, increased 0.6% (est. 0.5% rise) after a revised 0.5% decrease.
  • Capacity utilization, measuring the amount of a plant that is in use, rose to 78% (est. 78.3%) from 77.7%.

Key Takeaways

The latest results indicate a steady advance in the nation’s manufacturing sector. Factory output climbed at a 1.9% annualized rate from April through June, marking the third straight quarterly increase.

Automobile production jumped 7.8% in June from a month earlier when it plunged 8.6% after a major fire at a parts supplier. Last month’s increase was reflected in increased output of both consumer goods and business equipment.

Excluding motor vehicles, manufacturing production advanced 0.3% after a 0.4% drop in May. Separately, motor-vehicle sales remained strong in June, according to company reports from automakers such as General Motors Co. and Ford Motor Co.

One surprise was a decline in utility output even as temperatures climbed across the U.S. Last month was the third-warmest June on record, according to the National Oceanic and Atmospheric Administration’s website.

Mining production continued to strengthen on the heels of robust oil and gas well drilling. With the gain, the Fed’s index of mining in June surpassed the previous peak in December 2014.

While manufacturing is likely to keep expanding, headwinds are looming. Prices paid for materials are rising amid concerns about tariffs and supply constraints as businesses report having difficulty keeping pace with demand. Nonetheless, lower corporate and consumer taxes and a strong job market will remain positives for the business investment outlook.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75% of total industrial production, accounts for about 12% of the U.S. economy.

Other Details

  • Utility output fell 1.5% after dropping 0.7% the prior month.
  • Mining production rose 1.2%; with oil and gas well drilling rising 2.9%.
  • Production of consumer goods increased 0.7%, and output of business equipment rose 2.1%.

By Shobhana Chandra

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