July 15, 2016 — 9:15 AM EDT
Manufacturing in the U.S. last month posted the strongest advance since January, helped by automobile production and a sign domestic demand is improving.
The 0.4 percent gain at factories, which make up 75 percent of total industrial production, followed a 0.3 percent decline in May, a Federal Reserve report showed Friday in Washington. The median forecast in a Bloomberg survey of 25 economists called for a 0.3 percent rise. Total industrial production, which also includes mines and utilities, jumped 0.6 percent, also exceeding the median forecast and the biggest gain in almost a year.
Stabilization in oil and commodities prices and the fading drag from a stronger dollar are allowing manufacturers to find their footing. Trimmer inventories and a pickup in household demand will underpin factory activity, at the same time the fallout from the U.K.’s impending exit from the European Union poses a hurdle for American companies that sell overseas.
“As growth in consumer demand starts filtering through into the production front, we should see an improvement in manufacturing,” Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, said before the report. “It’s still going to be a slow process.”
Manufacturing accounts for about 12 percent of the economy. Economists’ estimates in the Bloomberg survey ranged from unchanged to an advance of 0.6 percent for factory output. The previous month’s reading was revised from a drop of 0.4 percent.
For total industrial production, the Bloomberg survey of 77 economists showed estimates ranging from a decline of 0.1 percent to a rise of 0.9 percent. The prior month was previously reported as a decrease of 0.4 percent.
Capacity utilization, which measures the amount of a plant that is in use, rose to 75.4 percent from 74.9 percent in the prior month.
Utility output surged 2.4 percent, after a 0.9 percent drop the previous month, the Fed report showed.
The results probably reflected warmer weather. It was the warmest June on record for the 48 contiguous states, with above-average temperatures from coast to coast, according to the National Oceanic and Atmospheric Administration.
Mining production, which includes oil drilling, increased
0.2 percent, reflecting stabilization in the price of oil and other commodities.
The output of motor vehicles and parts increased 5.9 percent after a 4.3 percent drop a month earlier. Excluding autos and parts, manufacturing was unchanged after a 0.1 percent rise.
Machinery production increased 1.1 percent, and output of computers and electronics fell 0.5 percent. Construction materials dropped 0.8 percent. Consumer goods production jumped
1.1 percent, while output of business equipment climbed 0.7 percent.