Industrial output in the U.S. grew by 0.6% in June, indicating that the domestic manufacturing sector is continuing its slow but steady progress towards stabilization.
Industrial production measures everything made in factories, utilities and mines. The consensus estimate was for growth of 0.4%.
The last time Industrial Production showed solid growth like this was almost exactly a year ago in July 2015. Many industry pundits were applauding the numbers as a solid-looking report of the overall health of manufacturing in the U.S. Some analysts are now expecting even better numbers for the second half of the year, especially in the fourth quarter.
This increase comes in conjunction with some other encouraging sings for the US Industry. The Index of the Institute for Supply Management reported it hit a 16 month high in June carried on all fronts, from news orders, exports and production. The stabilization of the global and domestic oil prices has also helped.
Some analysts caution, however, that only some parts of the sector have participated in the upswing yet, which may spell trouble for a continuing trend. Another cautious sign is that capacity use, which describes how much production capacity is actually utilized, is still 4.6% below its historical average, even though it has also improve a little in June.
While all this seems to be positive, it’s important to realize that year over year the industrial production has actually fallen.
This report is the last report issued prior to the Federal Reserve meeting scheduled for July 26-27. Janet Yellen, the Fed Chairwoman, has voiced her concerns about the lack of investment that shows in weak demand for heavy machinery and long lasting factory made goods. Unclear is also what consequences the Brexit will have on US manufacturing and production.