Manufacturing, mining power U.S. industrial production
WASHINGTON (Reuters) – U.S. 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 industrial production rose 0.6 percent last month after a downwardly revised 0.5 percent decline in May. Economists polled by Reuters had forecast industrial production rising 0.6 percent last month after a previously reported 0.1 percent dip in May.
Industrial production increased at a 6.0 percent annualized rate in the second quarter, faster than the 2.4 percent pace logged in the January-March period.
Manufacturing output surged 0.8 percent in June after decreasing 1.0 percent in May. A 7.8 percent jump in motor vehicle production buoyed manufacturing output last month. Motor vehicle production declined 8.6 percent 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 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 economic growth accelerated sharply in the second quarter.
Gross domestic product estimates for the April-June quarter are as high as a 5.2 percent rate, more than double the first quarter’s 2 percent pace.
Manufacturing, which accounts for about 12 percent 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 U.S. was especially vulnerable to a slowdown in its exports.
Manufacturing output increased at a 1.9 percent rate in the second quarter after growing at a 1.7 percent 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 percent, adding to the 2.2 percent 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 percent in June, with further gains likely following recent increases in oil prices. Mining output accelerated at a 19.4 percent rate in the second quarter after notching a 11.0 percent pace in the first quarter.
Utilities output fell 1.5 percent in June after declining 0.7 percent in May.
With production increasing solidly last month, capacity utilization, a measure of how fully firms are using their resources, increased to 78.0 percent from 77.7 percent 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.
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