Tuesday, August 16, 2011

Industrial Production in U.S. Rose 0.9% in July

By Jillian Berman - Aug 16, 2011 9:52 PM GMT+0800

Industrial production in the U.S. climbed in July by the most this year as carmakers started to shake off the effects of the disaster in Japan and higher temperatures boosted utility use.

The 0.9 percent increase in production at factories, mines and utilities followed a revised 0.4 percent gain that was more the previously estimated, figures from the Federal Reserve showed today. Economists projected a 0.5 percent rise in July, according to the median estimate in a Bloomberg News survey. Factory output rose by the most in four months.

Production of business equipment picked up, showing gains in the industry that led the recovery may be sustained even as manufacturers contend with a slowdown in consumer spending and exports. Factories have also kept a tight rein on inventories, limiting the need for large-scale cutbacks that could trigger an economic slump.

“Given some of the other negatives in the economy, I think you still have to point to manufacturing as a bit of a bright spot,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who correctly predicted the gain. Production was bolstered “by a beginning of the recovery in the auto sector. Manufacturing excluding motor vehicles was still up. Not great, but a decent outcome.”

Forecasts for industrial production in the Bloomberg survey of 85 economists ranged from gains of 0.1 percent to 1 percent.

Stocks declined after the report on growing concern over a global growth slowdown after Germany said its economy almost stalled in the second quarter. The Standard & Poor’s 500 Index fell 1.3 percent to 1,189.24 at 9:51 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.28 percent from 2.31 percent late yesterday.
Housing Starts

The housing market is still struggling, separate figures from the Commerce Department showed today. Housing starts dropped 1.5 percent in July to a 604,000 annual rate.

Manufacturing output increased 0.6 percent last month, led by gains at the nation’s automakers, the Fed’s report showed.

Production of automobiles and parts surged 5.2 percent last month, a rebound from the supply-chain disruptions that resulted from the March earthquake in Japan, the Fed report showed. Manufacturing excluding motor vehicles climbed 0.3 percent after a 0.2 percent gain in the prior month.

Motor-vehicle assemblies rose to 8.73 million units at an annual rate in July from 7.89 million, today’s report showed. Cars and light trucks sold at a 12.2 million annual pace in July, up from 11.4 million annual rate a month earlier, Autodata Corp. said last week. Deliveries at Detroit-based General Motors Corp. climbed 7.6 percent from the same month in 2010 to 214,915.
Second Half

“Although the economy has clearly lost some momentum, we do believe that it will continue to recover, but more gradually than we had originally anticipated as we move through the second half of the year,” Don Johnson, GM’s vice president of U.S. sales said on an Aug. 2 conference call.

Business equipment production rose 0.6 percent in July following a 0.2 percent gain in June. Output of computers and electronic products increased 0.5 percent after a 0.8 percent decline in June. Furniture production rose 0.7 percent after a 2.4 percent decrease.

Capacity utilization, which measures the amount of a plant that is in use, increased to 77.5 percent, the highest since August 2008, from 76.9 percent in June. The gauge compares with the average of 79.5 percent over the past 20 years.

Mining production, which includes oil drilling, rose 1.1 percent after a 1.2 percent gain. Utility output increased 2.8 percent, the most this year, after a 0.8 percent gain.
Heat Wave

Temperatures soared across the U.S., with July records in Texas and Oklahoma, according to the National Climatic Data Center. Last month, temperatures were “above normal” or “much above normal” in 41 of the 48 contiguous U.S. states, it said.

The U.S. economy grew at a 1.3 percent annual rate during the second quarter after almost stalling in the previous three months, according to Commerce Department figures. Fed policy makers pledged to keep the benchmark interest rate near zero to bolster a recovery that’s moving “considerably slower” than expected, policy makers said in a statement last week.

The drop in the value of the dollar could boost confidence among manufacturers. A weaker dollar benefits American companies by making their products more attractive to buyers overseas. The dollar dropped 7.9 percent in the 12 months ended in July against a weighted basket of currencies from the country’s biggest trading partners.
Growth Overseas

Peoria, Illinois-based Caterpillar Inc., the world’s largest construction- and mining-equipment maker, posted increased profits and sales in the second quarter, largely due to growth overseas, the company said July 22.

“China is doing a good job of balancing growth and inflation, and our expectations for China remain positive,” Chief Executive Officer Douglas Oberhelman said in the statement. “While we’ve seen some softening of growth in China, dealer deliveries to end users were up in the second quarter of 2011 compared with the second quarter of last year."

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