Industrial Production Unexpectedly Surged in July

A surge in auto production and oil and natural gas drilling boosted industrial production to a higher level in July than economists had forecast.

U.S. industrial production rose 0.6 percent in July, the Federal Reserve said Tuesday.

Capacity utilization jumped to 80.3 percent from 79.9 percent, just behind the April peak of 80.4 percent.

Economists had forecast a 0.3 percent increase in production and capacity utilization to rebound to 80.2 percent.

Manufacturing jumped 0.7 percent after declining in June and May. Motor vehicles and parts production jumped 6.6 percent, likely an indication that automakers have cleared up some of the supply chain problems that had been holding back output. This was the fastest pace of auto assemblies since August 2020.

Excluding cars and trucks, industrial output increased 0.3 percent

Mining production—which includes oil and natural gas—jumped 0.7 percent. The ongoing war in Ukraine has led to greater international demand for U.S. oil and gas, boosting production.

Output from utilities fell 0.8 percent in July.

The better-than-expected figures for manufacturing support the idea that the manufacturing sector is still expanding despite survey data suggesting a sharp slowdown or contraction. On Monday, the New York Federal Reserve reported that its survey of manufacturers indicated a steep decline in new orders and shipments in recent weeks.