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Home / Business / U.S. manufacturing output rose sharply in July, but still below the level of foresight

U.S. manufacturing output rose sharply in July, but still below the level of foresight



WASHINGTON (Reuters) – US plant output rose more than expected in July, boosted by a surge in motor vehicle output, although activity remained below its pre-COVID-19 pandemic peak.

The Federal Reserve said Friday that output rose 3.4% last month after advancing 7.4% in June. The third direct monthly profit left the factory output about 8% below its level in February. Economists surveyed by Reuters had forecast output output to grow 3.0% in July.

As businesses reopen, new coronavirus cases continue to spread across the country, keeping a lid on demand. The manufacturing, which accounts for 11% of the US economy, was struggling even before the onset of the pandemic in the country, a victim of the Trump administration’s trade war with China.

Lower crude prices as global economies gripped by coronavirus pressure have also underestimated costs by oil producers for drilling and shaft exploration equipment. Business spending on equipment has fallen for the straight five quarters, the longest such stretch since 2016.

Production of vehicles and parts rose 28.3% in July after accelerating to 118.3% in June. There has also been an increase in machinery, computers and electronic products, and electrical appliances, equipment and components.

Production output growth, coupled with a 3.3% increase in utilities and a 0.8% increase in mining, boosted industrial output by 3.0% in July. This followed an increase of 5.7% in June.

Capacity utilization for the manufacturing sector, a measure of how firms are making full use of their resources, rose 2.3 percentage points to 69.2% in July. Overall capacity utilization for the industrial sector increased by 2.1 percentage points to 70.6%. It is 9.2 percentage points below its 1972-2019 average.

Officials at the Fed tend to look at capacity building measures to signal how “clumsy” the economy remains – how much growth there is room to run before it becomes inflationary.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)


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