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Industrial production up 0.6% in June
US industrial production increased in June, boosted by a sharp rebound in manufacturing and further gains in mining output, the latest sign of robust economic growth in the second quarter.
The Federal Reserve said on Tuesday that industrial production rose 0.6 per cent last month after a downwardly revised 0.5 per cent decline in May. Economists polled by Reuters had forecast industrial production rising 0.6 per cent last month after a previously reported 0.1 per cent dip in May.
Industrial production increased at a 6 per cent annualised rate in the second quarter, faster than the 2.4 per cent pace logged in the January-March period.
Manufacturing output surged 0.8 per cent in June after decreasing one per cent in May. A 7.8 per cent jump in motor vehicle production buoyed manufacturing output last month. Motor vehicle production declined 8.6 per cent in May after a fire at a parts supplier caused a sharp drop in the assembly of trucks.
The data came on the heels of a report on Monday showing that retail sales not only rose solidly in June, but were much stronger than previously reported in May.
Strong industrial production and retail sales, together with smaller trade deficits in April and June suggest that economic growth accelerated sharply in the second quarter.
Gross domestic product (GDP) estimates for the April-June quarter are as high as a 5.2 per cent rate, more than double the first quarter's 2 per cent pace.
Manufacturing, which accounts for about 12 per cent of the economy, is being supported by a strong domestic and global economy. But escalating trade tensions between the United States and its major trade partners - including China, Canada, Mexico and the European Union - could undercut business spending.
The International Monetary Fund warned on Monday that tit-for-tat import tariffs threatened to derail the global economic recovery, adding that the US was especially vulnerable to a slowdown in its exports.
Manufacturing output increased at a 1.9 per cent rate in the second quarter after growing at a 1.7 per cent pace in first quarter. In June, there was an increase in the production of wood, computer and electronic products as well as aerospace and miscellaneous transportation equipment.
Mining production increased 1.2 per cent, adding to the 2.2 per cent rise in May. Mining output has surpassed its previous historical peak, which was set in December 2014.
Oil and gas well drilling rose 2.9 per cent in June, with further gains likely following recent increases in oil prices. Mining output accelerated at a 19.4 per cent rate in the second quarter after notching a 11 per cent pace in the first quarter.
Utilities output fell 1.5 per cent in June after declining 0.7 per cent in May.
With production increasing solidly last month, capacity utilisation, a measure of how fully firms are using their resources, increased to 78 per cent from 77.7 per cent in May. It is 1.8 percentage points below its 1972 to 2017 average.
Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy - how far growth has room to run before it becomes inflationary. REUTERS