Factory Output Increases for First Time in Three Months

VW factory
Workers on the production line at Volkswagen's plant in Chattanooga, Tenn. (Mark Elias/Bloomberg)

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Production at U.S. factories increased in July for the first time in three months, propelled by a pickup in motor vehicle output that masked more mixed results in other categories.

The 0.7% increase in manufacturing production followed a revised 0.4% June decline, Federal Reserve data showed Aug. 16. Including mining and utilities, total industrial output climbed 0.6% last month.

The median forecast in a Bloomberg survey of economists called for 0.3% increases in both factory output and total industrial production.

Despite firming last month, manufacturing has moderated and risks losing more momentum as businesses contend with an inventory overhang and an easing in domestic demand for goods. Recent factory surveys have illustrated a pullback in orders, while weaker export markets amid a strong U.S. dollar represent another headwind.

A New York Fed survey on Aug. 15 showed manufacturing in the state suffered its second-largest monthly decline on record as bookings and shipments plunged. Separate regional data and national figures over the next week will help shed more light on the extent of the industry’s pullback.

The Aug. 16 industrial production report showed output of motor vehicles rose 6.6%, the most in four months. An easing of bottlenecks on semiconductor supplies is affording automakers more room to increase output.

Excluding autos, factory production increased 0.3% after falling in the prior two months. While the output of fabricated metals, wood products and aerospace equipment advanced in July, production of electrical equipment and appliances, primary metals and furniture declined.

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Business equipment output rose 0.6%, the first increase in three months. Within production of consumer goods, a sharp rise in autos more than offset declines in home electronics, appliances and furniture.

The Fed’s report also showed capacity utilization at factories climbed to 79.8% from 79.3%.

Aside from manufacturing, utility output fell 0.8%. Mining rose 0.7%, the third straight monthly advance. Oil and gas well drilling increased 3.3%.

— With assistance from Chris Middleton.