The output of America's factories, mines and utilities more than doubled their forecast in July giving the industrial sector a strong start into the third quarter.
Total industrial production climbed 0.7 percent, the best since April according to data from the Federal Reserve in Washington on Tuesday. The prior month’s increase was revised down to 0.4 percent from 0.6 percent.
Gains were led by a 0.5 percent rise in factory production and a 2.1 percent jump in utility use, the same as in June, largely due to the warm weather in much of the country. Automobile and related production increased 1.9 percent in July after a 5.3 percent rise in June. Mining activity which includes oil drilling and exploration rose 0.7 percent in July after a 0.3 percent drop in June.
Annual industrial production fell 0.5 percent in July, the eleventh negative month in a row. This is the longest non-recessionary contraction in U.S. history.
Manufacturing output accounts for between 12 to 15 percent of the U.S. economy but is commonly viewed as a leading indicator for the level of overall economic activity. The June reading was revised to a 0.3 percent increase from a 0.4 percent gain.
Factory production has leveled off after a sharp two-year decline but the outlook is still gloomy, tempered by fading prospects for global growth, the unknown impact of the U.K.’s exit from the European Union over the next two years, the Italian constitutional referendum in October and endemic weakness in the European banking sector.
The partial rebound in commodity prices, particularly crude oil, has helped reverse the 18 month decline in the oil business. On Friday Baker Hughes Inc. reported that 66 new rigs have started work since June 24th, bringing the total to 396, the highest since February 24th.
Capacity utilization, which measures the amount of the U.S. industrial capacity that is use each month, increased to 75.9 percent in July from 75.4 percent the prior month.
The Atlanta Federal Reserve's GDPNow forecast for third quarter GDP rose a tick to 3.6 percent citing, "this morning's new residential construction release from the U.S. Census Bureau, the forecast for third-quarter real residential investment growth increased from 0.4 percent to 2.4 percent."
The bureau reported that housing starts rose to a 1.211 million annual rate in July up from 1.186 in June. Building permits were stable at 1.152 million units after 1.153 in June.
U.S. annualized GDP growth in the second quarter was 1.2 percent and has averaged just 1 per since the third quarter of 2015.
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