Industrial production in the US unexpectedly rose in August, signaling manufacturing will support the world’s largest economy.
Output at factories, mines and utilities climbed 0.2 per cent after a 0.9 per cent gain in July, figures from the Federal Reserve showed on Thursday. Economists had forecast no change, according to the median estimate in a Bloomberg News survey. Factory production, which makes up 75 per cent of the total, advanced 0.5 per cent.
Overseas demand and capital spending by American companies may keep assembly lines busy and boost manufacturing, which led the recovery from the recession. At the same time, unemployment above nine per cent and the lack of jobs is limiting sales, one reason factories may find it harder to gain speed.
“Manufacturing will continue to expand,” said Kurt Rankin, an economist at PNC Financial Services Group Inc in Pittsburgh, who accurately projected the gain in industrial production. “Emerging markets are still growing, and that’s giving an opportunity for exports of US-manufactured goods.”
Stocks rallied after the European Central Bank announced new liquidity measures in cooperation with the Federal Reserve. The Standard & Poor’s 500 Index climbed one per cent to 1,201.04 at 10:12 a.m. in New York. Other reports on Thursday showed consumer prices climbed in August, jobless claims jumped last week and manufacturing in the New York and Philadelphia regions shrank in September.
More Inflation
The cost of living rose 0.4 per cent, more than forecast, after a 0.5 per cent gain in July, according to a report from the Labor Department. Costs minus fuel and food rose 0.2 per cent for a second month.
The Fed Bank of New York’s general economic index dropped to minus 8.8, the weakest reading since November, from minus 7.7 in August, the branch of the central bank said. The Fed Bank of Philadelphia’s index rose to minus 17.5 in September from minus 30.7 the prior month. Readings less than zero signal contraction.
The regional reports overstated the degree of the slowdown in manufacturing last month. The Institute for Supply Management’s national figure showed factories continued to expand in August while the New York and Philadelphia measures slumped.
Economist Estimates
Estimates of the 83 economists surveyed by Bloomberg ranged from an increase of 0.4 per cent in industrial production to a drop of 0.4 per cent. Manufacturing accounts for about 12 per cent of the economy.
On Thursday’s production report showed factory output climbed after increasing 0.6 per cent in July. Capacity utilization, which measures the amount of a plant in use, rose to 77.4 per cent from a revised 77.3 per cent in July, that was lower than previously estimated. The gauge compares with the average of 79.5 per cent over the past 20 years.
Mining production, which includes oil drilling, increased 1.2 per cent. Utility output dropped three per cent, as temperatures moderated from the prior month, after a 2.8 per cent gain.
Automakers are recovering after a temporary shortage of parts following the earthquake and tsunami in Japan that constrained sales and production. The output of motor vehicles and parts increased 1.7 per cent after a 4.5 per cent jump a month earlier, on Thursday’s report showed.
