WASHINGTON (AP) — Industrial production rose in July on the strength of U.S. manufacturing, as auto factories stayed open and businesses replaced worn-out equipment.
Output at America's factories, mines and utilities increased 1.0 percent last month, the Federal Reserve reported Tuesday.
Factory output, the largest single component of industrial production, grew 1.1 percent. It was the biggest jump in nearly a year. Boosting output were auto plants that kept operating when they normally shutter for summer renovations. Even without the strong auto sector, factory output rose 0.6 percent.
Business equipment production grew 1.8 percent, the most of any major market group. That number has remained positive since February, while consumer goods and construction supplies have been uneven.
The last time factory output increased so steeply was August 2009, when the government's Cash for Clunkers program drove a 1.3 percent gain.
However, June's results were revised to show a 0.1 percent loss. That was the first decrease since the previous June.
Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, said the numbers for June and July appeared more volatile because of "statistical quirks" such as the unexpected auto production.
Also, business equipment output was boosted by auto production. That's because most of the auto growth was in light trucks, which are counted as business equipment.
"Things are nowhere near as bad as they appeared in June and nowhere near as good as the headline number in July would indicate," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Economists said the numbers suggest manufacturing will continue growing, but at a slower pace than over the past year. Businesses are almost done restocking inventories that grew razor-thin during the recession. Further growth will require spending by consumers, who face high unemployment and stagnant income growth.
Strong manufacturing growth should ease fears that the economy could fall back into a recession.
U.S. factories were operating at 74.8 percent of their capacity, a 0.7 percent increase from June but still well below the historical average of 80.6 percent.
