WASHINGTON (AP) -- U.S. factories cranked out more business equipment, home electronics and autos in June, boosting manufacturing output for the second straight month. The gains suggest factories may be starting to recover from a slow start this year.
The Federal Reserve said Tuesday that manufacturing production rose 0.3 percent in June from May. That followed a 0.2 percent gain the previous month. Still, the two consecutive gains barely offset production declines in March and April.
Overall industrial production, which includes factories, mines and utilities, also rose 0.3 percent in June. Mining output increased 0.8 percent, while utility output slid 0.1 percent.
Manufacturing is the most critical component of industrial production. The recent gains are a hopeful sign that factories could help the economy grow in the second half of the year.
The "report confirms the picture of a moderate recovery in the manufacturing sector," Annalisa Piazza, senior economist at Newedge Strategy, wrote in a research note.
Manufacturers have struggled this year, providing little support to the economy. Their output is up just 1.8 percent over the past 12 months. And factories have cut jobs in each of the past four months, shedding a total of 24,000 since February.
A key reason for the weakness is slower global growth has cut demand for U.S. exports. Europe is still in a recession and China's economy grew from April through June at the slowest pace in more than two decades.
Manufacturing has shown improvement in Britain, France and Italy. Large Japanese manufacturers are also sounding optimistic for the first time in nearly two years.
There have been other positive signs that suggest U.S. factory production could increase in the second half of the year.
The Institute for Supply Management said that factory activity improved in June after hitting its lowest level in four years. But the closely watched manufacturing survey reported that employment fell to its lowest level since September 2009.
Factory activity in the New York region grew for the second straight month in July, according to the Federal Reserve Bank of New York's Empire State manufacturing survey.
U.S. businesses reported a strong 1.1 percent increase in sales in May, the Commerce Department reported. Those same firms only increased their stockpiles slightly, suggesting they will need to order more goods to keep up with demand.
And Americans bought more cars and trucks, furniture and clothes in June, according to a separate Commerce report on retail spending. But consumers cut back almost everywhere else, and overall retail sales rose just 0.4 percent last month from May.
Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation, has weighed in with some opinions on the recent numbers:
“The Federal Reserve reports that industrial production increased 0.3 percent in June, following no growth in May. Manufacturing industrial production also increased 0.3 percent in June. Fortunately, manufacturing activity was revised upward for both April and May. The moderate gain in manufacturing production was not uniform across industries—production in 8 of the 20 main manufacturing industries declined while 12 industries posted growth.
“Importantly, though, some of the largest manufacturing industries increased production at a fast pace in June. Machinery production rose 1.5 percent, motor vehicles and parts was up 1.3 percent, and miscellaneous manufacturing (driven largely by medical equipment and supplies) rose 1.4 percent last month. The mixed results in other manufacturing industries reflect inventory corrections to indicate slow domestic demand, adverse trade positions, and structural change.
“The quarter-to-quarter growth at annual rate, as GDP is measured, shows that manufacturing industrial production increased 5.1 percent in the first quarter and declined 0.2 percent in the second quarter of 2013. Inflation-adjusted GDP increased 1.8 percent in the first quarter and is forecast to increase 1.4 percent in the second quarter. Clearly, manufacturing production growth significantly outpaced overall economic growth early this year and has recently been correcting to the relatively slow pace of growth in the overall economy. Manufacturing should grow faster than GDP again in 2013, but the growth premium is narrowed by sluggish domestic demand and lackluster export opportunities.”
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