Industrial Output Leapt 0.4% in July On Strong Manufacturing-Sector Gains
WASHINGTON -- Industrial output rose sharply last month as a resurgent manufacturing sector offset steep declines in production by the nation's utilities and car makers.</br></br>The Federal Reserve said industrial production rose by 0.4% in July, double its 0.2% gain in the previous month. The increase was in line with market expectations and brought the index 5.8% higher than its level a year earlier.</br></br>The nation's factories, meanwhile, were operating at 82.3% of capacity in July, a notch higher than the 82.2% level recorded in June. Many analysts believe that plants can operate at as much as 84% of capacity before production bottlenecks develop, raising risks of inflation as companies increase prices to offset the costs of bringing new plants into operation to ease delays.</br></br>The numbers point to continued strength in the manufacturing sector, the biggest component of the industrial-output measure. Manufacturing output rose by 0.5% and is now 6.8% stronger than year-earlier levels. In June, output rose 0.4% and was 6.4% higher year over year.</br></br>The July increase came despite a 5.5% drop in motor-vehicle production as car and truck manufacturers began retooling factories for new product lines. Excluding the vehicle sector, manufacturing output rose 0.9%, its sharpest gain since October.