U.S. industrial production rose in June by the largest amount in 10 months, led by a strong rebound in auto production.
The Federal Reserve says industrial production increased 0.6 per cent last month, the best showing since a similar gain last August. In May industrial production had fallen 0.3 per cent.
The key manufacturing sector posted a 0.4 per cent rise, reflecting a jump in the output of motor vehicles and parts, which rose by 5.9 per cent after having fallen by 4.3 per cent in May.
Output at the nation’s utilities rose 2.4 per cent as electricity production increased as warmer weather than normal boosted demand for air conditioning. Output in the mining sector edged up a tiny 0.2 per cent, the second small increase after eight straight monthly declines.
The 0.2 per cent June gain in industrial production was stronger than the 0.2 per cent increase that many economists had been forecasting.
Jennifer Lee, senior economist at BMO Capital Markets, said the June report offered a glimmer of hope for better days ahead for industrial production.
“This latest broad-based gain hints that we’re starting to see some upward momentum,” she wrote in a research note.
Overall capacity utilization rose to 75.4 per cent in June, compared to 74.9 per cent in May. At the depths of the Great Recession in 2009, U.S. industry was operating at just 66.7 per cent of capacity. Even after seven years of an economic expansion, the 75.4 per cent operating rate in June was below the 80 per cent average from 1972 through 2015.
Both manufacturing and mining have struggled over the past year. Mining, which includes oil production, has been battered by a steep drop in oil prices which triggered sharp cutbacks in exploration and production. Manufacturers have struggled with falling export sales, reflecting global economic weakness and a strong dollar, which had made U.S. goods more expensive overseas.
Despite the rise in June, industrial production has fallen for three consecutive quarters, dropping at an annual rate of 1 per cent in the April-June period after declining at a 1.8 per cent rate in the first quarter.
There are now worries about what the June 23 decision by British voters to leave the European Union will do to global confidence. But there have been some hopeful signs that manufacturing is beginning to stabilize.
The Institute for Supply Management reported that its closely watched index of manufacturing activity expanded for a fourth consecutive month in June. The index rose to a reading of 53.2, up from 51.3 in May. Anything above 50 signals growth.
The ISM index had stayed below 50 from October through February before returning to expansion territory in March.