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US Industrial Production Rises Faster than Forecast in July

H.S. Borji
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US industrial production advanced faster than forecast in July, as manufacturing output rose at the fastest pace since February, adding to the view factory output was helping to spark recovery at the beginning of the third quarter.

Total industrial production advanced at a pace of 0.4 percent in July, following an upwardly revised gain of 0.2 percent the previous month, the Board of Governors of the Federal Reserve System reported today in Washington. Market analysts forecast industrial production to rise 0.3 percent in July.

July marked the sixth consecutive month total production had increased.

Year-on-year, total production rose 5 percent, official data showed.

Manufacturing production, which accounts for about 12 percent of the US economy and three-quarters of total production, advanced 1 percent in July, following an upwardly revised gain of 0.3 percent the previous month. July marked the fastest pace of manufacturing output since February.

Compared to July 2013, manufacturing output was up 4.9 percent.

Manufacturing output was led by a large increase in motor vehicles and parts production, which advanced 10.1 percent over the previous month.

On August 2 the Institute for Supply Management said the US manufacturing industry expanded faster than forecast in July, as new orders and overall production continued to rise. Higher levels of new business kept job growth consistent, as half of the 18 manufacturing industries said they increased payrolls last month.

In total, 15 of the 18 manufacturing industries reported gains in July, ISM data showed. The gauge of overall manufacturing activity rose 1.8 percentage points to 57.1.

The mining sector, which includes oil drilling, advanced 0.3 percent in July, following an upwardly revised gain of 1.3 percent in June. Compared to the previous 12 months, mining was up 8.6 percent.

Utilities output declined 3.4 percent, following a 0.7 percent drop in June. Year-on-year, utilities output was down 1 percent.

Among the major market groups, the production of consumer goods advanced 0.5 percent, following a 0.2 percent increase in June. Year-on-year, consumer goods production increased 4.3 percent.

The production of business equipment increased 1.3 percent, which translated into an annualized gain of 7 percent.

Materials output edged up 0.3 percent, which translated into an annualized gain of 5.5 percent.

Industrial capacity utilization, which gauges how fully companies are using their factory resources, edged up slightly to 79.2 percent from 79.1 percent. Capacity utilization was 1.7 percentage points higher than year ago levels, but remained 0.9 percentage points below its long-run (1972-2013) average.

The latest industrial production figures suggest the US economy was growing steadily at the start of the third quarter, and that factory output was playing a key role in supporting the recovery efforts. The US economy grew at an annual rate of 4 percent in the second quarter, the Commerce Department’s advance estimate revealed last month. However, recent data on wholesale and business inventories suggest the government could revise down its initial estimate.

The Commerce Department will post revised GDP data at the end of the month.

The Federal Reserve in June downgraded its 2014 growth forecast after the economy contracted sharply in the first quarter, largely as a result of severe weather. Central bankers now say the US economy will grow between 2.1 percent and 2.3 percent in all of 2014, down from a previous estimate of nearly 3 percent.

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