(Bloomberg) -- U.S. factory output rose by more than expected inJune on a solid gain in motor-vehicle production, suggestingAmerican manufacturing is regaining a foothold despitefluctuating trade policies and a global slowdown.
Manufacturing output climbed 0.4% from the prior month after anunrevised 0.2% increase in May, Federal Reserve data showedTuesday. Total industrial production, which also includes minesand utilities, was unchanged -- missing economist estimates fora 0.1% gain -- as milder-than-usual weather reduced demand forair conditioning, according to the report.
Key Insights
- The data, coming on the heels of better-than-projected retail sales figures earlier Tuesday, add to signs the economy is holding up amid steady gains in national employment and incomes. Still, factories face headwinds from slowing global growth and lingering trade uncertainty, forces that are pushing Fed policy makers toward a widely anticipated interest-rate cut later this month.
- Production of motor vehicles and parts increased 2.9%; excluding cars, manufacturing production rose 0.2% after no change the prior month. Other sectors that saw gains include petroleum and coal products, and computer and electronic products.
- Even so, during the second quarter, factory production fell at a 2.2% annual rate for the first back-to-back declines since 2016 -- evidence of weakness that the central bank could potentially cite as one of the reasons for an interest-rate cut.
- In addition, regional surveys by Fed district banks showed factory activity cooled in June. The Institute for Supply Management's national factory index also fell for the third straight month, touching the weakest level since October 2016.
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- Capacity utilization, measuring the amount of a plant that is in use, fell to 77.9% in June from 78.1%.
- Utility output dropped 3.6% after advancing 2.4% the prior month. Mining production rose 0.2%, with oil and gas well drilling up 0.5%.
- Categories showing declines included machinery, furniture and chemicals.
- The Fed's monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy.
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