US Manufacturing Surges in July

United States manufacturing, which accounts for about 12% of the economy, surged by 1% in July after rising by 0.3% in June, according to the Federal Reserve. 

Auto production led the way with a +10.1% leap, its biggest rise in five years. Strong machinery output during the month also indicates that business investment is beginning to pick up. The strong manufacturing report means the U.S. economy is still accelerating on top of the second quarter’s ripping +4% annual pace that is consistent with 3% growth this quarter.

The strong rise in manufacturing and a 0.3% advance in mining output offset a mild weather-related 3.4% decline in utilities production, for a +.4% rise in Industrial production in July. Despite international turmoil and weak economic performance in Europe and Asia, the Standard & Poor’s 500 Index was unchanged on Friday at 19,995, and interest rates on the U.S. Treasury ten-year bond fell to 2.38%.

The highly watched Institute for Supply Management’s factory index rose to 57.1 last month, the highest reading since April 2011. Readings above 50 signal expansion, and readings below 59 signal contraction. Last month’s gain was the largest since February and reflected increases across all major categories.

Cars and light trucks sold at a 16.4 million annualized pace in July after a 16.9 million pace in June that was the strongest since July 2006, according to data from Ward’s Automotive Group.

Industrial capacity utilization edged up +0.1% to 79.2%, a rate 1.7% above its level of a year ago last month, its highest level since February 2008. After being crushed in the 2008-2009 Great Recession, utilization is only -0.9% below its 40-year-long-run average of 80.1%.

In other news, the Bureau of Labor Statistics reported that for the week ending August 9, the advance figure for seasonally adjusted initial claims was 311,000, an increase of 21,000 from the previous week's level of 290,000. The four-week moving average was 295,750. 

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