WASHINGTON - Industrial production rose in June by the most in four months, signaling U.S. manufacturing is improving heading into the second half of the year.
Output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May, a Federal Reserve report showed today in Washington. The gain matched the median forecast of 86 economists surveyed by Bloomberg. Manufacturing, which makes up 75 percent of total output, increased more than projected.
Lean inventories and increased automobile sales are helping to offset softer overseas markets this year and the effects of broad U.S. government budget cuts and higher taxes. A pickup in demand and sustained production gains would help bolster expansion in the world’s largest economy.
“Manufacturing has been weak for several months, that’s the bad news,” Ward McCarthy, chief financial economist at Jefferies LLC in New York, said in an interview before the report. “The good news is it looks like some of the forward indicators suggest manufacturing is going to pick up, and that it may already be picking up.”
Estimates in the Bloomberg survey ranged from drop of 0.2 percent to an increase of 0.7 percent.
The cost of living rose in June by the most in four months as gasoline prices increased, a sign inflation is advancing toward the Federal Reserve’s goal, another report today showed. The consumer-price index increased 0.5 percent after a 0.1 percent gain the prior month, according to Labor Department figures. The median forecast in a Bloomberg survey called for a 0.3 percent rise.
Stock-index futures were little changed after the reports. The contract on the Standard & Poor’s 500 Index maturing in September climbed less than 0.1 percent to 1,677.7 at 9:16 a.m. in New York.
Manufacturing, which accounts for about 12 percent of the economy, increased 0.3 percent, also the best performance in four months, after a 0.2 percent rise in May that was larger than previously estimated. Economists projected a 0.2 percent increase, according to the Bloomberg survey median.
Production of machinery, including computers and electronic products, increased 1.5 percent last month after dropping 0.7 percent in May. Applied Materials Inc., the largest seller of machinery used in the production of semiconductors and flat- screen displays, expects industry spending to pick up next year as chipmakers boost output to meet demand for mobile-device parts.
Competition among smartphone providers is driving demand for more advanced parts and improvement in the machines that make them, Chief Executive Officer Mike Splinter said at a July 8 analyst briefing in San Francisco.
The Fed’s report today also showed motor vehicle production rose 1.3 percent in June following a 0.5 percent increase the month before. Factory output excluding production of vehicles and parts advanced 0.2 percent for a second month.
The automobile industry has been a bright spot for the economy, with the vehicle sales rate surging to 15.9 million in June, its best monthly pace since November 2007, according to data from Ward’s Automotive Group.
Utility production dropped 0.1 percent in June after falling 2.8 percent the previous month.
Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.