US industrial output jumps as automobile production surges

This would mean that the Fed report exaggerated the gains in motor vehicle output last month and that auto production might dip in August. Other sectors making significant increases in June included wood products (up 1.4 percent), apparel and leather (up 1.0 percent), paper (up 1.0 percent), plastics and rubber products (up 1.0 percent) and chemicals (up 0.5 percent).

Economists estimate that industrial production rose 0.3% month-on-month, up from 0.2% prior, according to Bloomberg.

The step up in overall production pushed the percentage of industrial capacity in use up to 78.0 per cent in July, in line with forecasts, from a downwardly revised 77.7 per cent in June. Still, over the past year, cheaper energy prices have caused drillers to shut down their wells until oil and natural gas become more profitable. Utility output, which often fluctuates sharply from month to month depending on weather, fell 1 percent.

The bigger than expected increase in production came as manufacturing output increased by 0.8% in July after dipping by 0.3% in the previous month. That sharp increase has led to pricier U.S. goods around the world, hurting exports and orders. The decline has forced energy firms to curtail drilling, eliminating much of the need for new pipelines and equipment that had boosted factory orders in years when prices were closer to $100 a barrel.

Still, the Fed report suggested that factories are adapting to these headwinds. This was the second consecutive monthly gain. (Note that the data were also updated with a new base year, changing it from 2007=100 to 2012=100.) Capacity utilization for manufacturers increased from 75.7 percent to 76.2 percent. For the first half of the year, this category has declined 3.5 per cent from the same period a year ago and has slowed overall economic growth.