RTTNews - With auto production showing a notable increase, the Federal Reserve released a report on Friday showing that industrial production in the month of July increased by more than economists had been anticipating.
The report showed that industrial production increased by 0.5 percent in July after falling by 0.4 percent in June. With the increase, industrial production rose for the first time since December of 2007
Economists had been expecting a slightly more modest increase in industrial production of about 0.4 percent.
A notable increase in the production of motor vehicles and parts contributed to the stronger than expected, with auto production jumping 20.1 percent in July after falling 2.4 percent in June. The rebound came as GM and Chrysler brought plants back on line.
The increase in auto production contributed to a 1.0 percent increase in production in the manufacturing sector, which fell by 0.6 percent in the previous month. Excluding the jump in auto production, manufacturing production edged up just 0.2 percent.
While the report also showed that mining production rose 0.8 percent in July, the output of utilities fell 2.4 percent due to unseasonably mild temperatures.
Peter Boockvar, equity strategist for Miller Tabak, said, Historically, [industrial production] is never market moving on the day of release, but the importance of auto production to the 2nd half recovery theme is big and thus this data grows in relevance.
The report also showed that the capacity utilization rate rose to 68.5 percent in July from a revised 68.1 percent in June. Capacity utilization had been expected to edge up to 68.3 percent from the 68.0 percent originally reported for the previous month.
The increase in the capacity utilization rate came as capacity utilization in the manufacturing sector rose to 65.4 percent in July from 64.7 in June. Capacity utilization in the mining sector also edged up to 81.7 percent from 81.0 percent.
On the other hand, capacity utilization in the utilities sector fell to 77.6 percent in July from 79.7 percent in the previous month.
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