Manufacturing activity along with capacity utilization in the manufacturing sector are indicative of how much more the economy may be able to grow before inflation becomes a concern.
There has been an acceleration in U.S. manufacturing output for the second straight month in June in what can be essentially be attributed to increased production of motor vehicles and their parts.
On Tuesday, the Federal Reserve stated manufacturing production in the country has risen by 0.4% in June, up by 0.2% that was expected by analysts.
The data is likely to ease lingering concerns on he strength of the U.S. factory sector in the face of a slow down in the global economy.
Suprisingly, despite these recent gains, the manufacturing sector is down by 2.2% for the second quarter – its biggest quarterly decline since 2016’s second quarter.
According to the Federal Reserve, “the manufacturing boost was significantly driven by a 2.9% increase in motor vehicle and parts production. Without it, manufacturing output only grew 0.2%”.
The overall industrial production remained unchanged in June, and was in fact down by 1.2% for the second quarter, marking its second consecutive quarterly decrease.
Production of non-metallic mineral products rose by 1.1% in June, while the production of machinery and electrical equipment and appliances both fell by 1%. Gains in mining and manufacturing, which was up by 0.2% in June, offset a 3.6% decline in output by utilities, since a cooler summer reduced the requirement for air conditioning.
Significantly, capacity utilization in the manufacturing sector, a unit which measures the extent to which firms are using their resources, climbed to 75.9% in June, up from 75.6% in May. However, overall capacity utilization saw a decline and dipped to 77.9% in June, standing 1.9% below its 1972-2018 average.