Factory output in the US rises by 0.7% in June as companies invest in vehicles and machinery.
July 18, 2012
by The Canadian Press
WASHINGTON: US industrial production rose in June as factories made more cars, machines and business equipment, the Federal Reserve said. Factory output recovered to levels reached earlier this spring but appears to be levelling off.
Factory output rose 0.7% last month, after falling by the same amount in May, the Fed said. Factories produced more machines and vehicles used by businesses. Production of consumer goods edged higher. Auto production rebounded after its first decline of the year.
Overall industrial production, which includes mining and utilities, rose 0.4% in June. Mining activity increased 0.7%, while utility output fell 1.9%.
June’s strong results follow a period of shaky growth for the factory sector, which is a crucial contributor to economic expansion. Factory output fell in two of the past four months.
“The trend has downshifted,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “I wouldn’t extrapolate the rebound in June as a sign that momentum is picking up again.” Factory growth slowed in the second quarter to an annual rate of 1.4%, after leaping 9.8% in the first quarter, O’Sullivan noted.
Other indicators of factory output also have weakened. A manufacturing survey by the Institute for Supply Management fell in June for the first time in nearly three years. Indexes for exports, production and new orders all softened.
Demand for exports has weakened in recent months as Europe battles a deep recession and China’s economy grows more slowly.
US consumers are spending sluggishly, creating less new demand for factory goods. Americans spent less at retail businesses in June for the third straight month, the Commerce Department said Monday. It was the first three-month decline for retail sales since the height of the financial crisis.
Most other economic data also weakened in the April-to-June quarter. Job growth slowed to a crawl in part because manufacturers hired fewer new workers.
U.S. industry was operating at 78.9% of its total capacity, the same level as April. It dipped to 78.7% in May.
Factory output has increased 15.5% since its recession-era low, reached in June 2009. It remains 2.9% below its pre-recession peak, reached in June 2007.
©The Canadian Press