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Industrial production in the U.S. increased in July, propelled by a pickup in motor vehicle output and a rebound in utility use during the hottest month on record.
The 0.6 percent increase last month at factories, mines and utilities followed a revised 0.1 percent gain in June that was smaller than previously reported, Federal Reserve data showed today in Washington. Economists forecast a 0.5 percent rise, according to the Bloomberg survey median. Manufacturing, which makes up about 75 percent of total production, rose 0.5 percent for a second month.
The pickup in industrial production, the most in three months, may ease concerns that the industry that’s powered the expansion is faltering. At the same time, recessions in parts of Europe and the prospect of fiscal tightening in the U.S. are hurdles for American factories.
“There are still strong trends in the auto industry and a number of other sectors which will keep industrial production from dipping into the negative this year,” Guy LeBas, fixed- income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report.
Projections from the 85 economists in the Bloomberg survey ranged from a decline of 0.2 percent to an increase of 1.1 percent after a previously reported 0.4 percent gain in June.
A report from the Federal Reserve Bank of New York showed manufacturing in the region unexpectedly contracted this month. The so-called Empire State Index fell to minus 5.9 in August from 7.4 last month. Readings less than zero signal contraction in the measure that covers New York, northern New Jersey and southern Connecticut.
The Fed’s production report showed motor vehicle output increased 3.3 percent in July after a 1.9 percent increase the month before. Machinery output decreased 1.9 percent following a 2.3 percent increase.
Cars and light trucks sold in July at a 14.1 million annual rate after a 14.3 million pace in June, according to data from Ward’s Automotive Group.
Factory output excluding production of vehicles and parts rose 0.2 percent in July after climbing 0.4 percent. Output of business equipment decreased 0.1 percent after a 1.9 percent gain in June.
Utility production increased 1.3 percent after slumping 3.3 percent in June. July was the hottest month in the lower 48 states in records going back to 1895, according to the National Oceanic and Atmospheric Administration. The average temperature in the 48 states was 77.6 degrees Fahrenheit (25.3 Celsius), or 3.3 degrees above normal, the agency reported.
Mining output increased 1.2 percent after increasing 0.5 percent the prior month, the Fed said.
Today’s report also showed that capacity utilization, which measures what portion of a plant is producing, increased to 79.3 percent from 78.9 percent in June.
Figures released earlier this month showed manufacturing unexpectedly contracted in July for a second month. The Institute for Supply Management’s manufacturing index, a national barometer of factory strength, was 49.8 last month, was little changed from a three-year low reached in June. Export demand dropped to its lowest since April 2009.
Manufacturers such as ON Semiconductor Corp. (ONNN) of Phoenix are tempering expectations based on a slowdown in the global economy.
“One cannot assume that there’s any major elements going to dramatically improve if you look at either Japan or North America or Europe,” Donald Colvin, the company’s executive vice president and chief financial officer, said at an Aug. 13 conference.
Deere & Co. (DE), the largest maker of farm equipment, posted fiscal third-quarter profit that trailed analysts’ estimates and cut its full-year earnings forecast after global demand slowed.
Net income climbed to $788 million, or $1.98 a share, in the three months ended July 31 from $712.3 million, or $1.69, a year ago, Moline, Illinois-based Deere said today in a statement. That missed the $2.32 average of 17 estimates compiled by Bloomberg. Equipment sales rose 16 percent from a year ago, compared with the 25 percent increase Deere forecast in May.
“Sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products,” Chairman and Chief Executive Officer Sam Allen said in the statement.
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