Led by an increase in motor vehicles, the output of US factories rose 0.4 percent in July, the best gain in 10 months, the Federal Reserve reported Friday. Overall, industrial production at the nation's factories, mines and utilities increased a seasonally adjusted 0.2 percent, as expected, despite a 1.9 percent drop in output of utilities. See Economic Forecast. Output of mines increased 0.9 percent in July. June's industrial production was revised lower to a 0.4 percent increase. Industrial production has now risen two months in a row, after having fallen the previous four months. Read the full report. Industrial production is one of the four major monthly economic indicators used by economists to judge whether the economy's in recession. After peaking in January, output is down 0.1 percent in the past year. Manufacturing output is down 1.1 percent in the past year. Capacity utilization - key gauge of inflationary pressures - rose a tenth of a percentage point, to 79.9 percent, last month, but this remains far below the level that would signal tight supply chains. “The gain in factory output during July was inconsistent with the 0.1 percent drop in the manufacturing aggregate hours worked,” wrote Joe Liro, an economist for Stone & McCarthy Research. Motor vehicle output increased 3.6 percent in July after 4.8 percent growth in June. “The story is one of rebounds from sharp production cuts earlier in the year due to both slowing demand and labor strikes,” explained Stephen Gallagher, economist for Societe Generale. “The gains now reflect a recovery from strike activity and a seasonal change-over to produce 2009 model vehicles.” Still, motor-vehicle production is down 10.4 percent from a year earlier. The increased output of motor vehicles flies in the face of the worst sales season in decades: High energy prices and tight credit conditions have reduced demand for trucks, and automakers are scrambling to shift production to more-efficient cars. Excluding motor vehicles, manufacturing output was 0.2 percent higher in July, the Fed's data showed. Production of business equipment increased 0.8 percent, led by transit equipment and defense goods. Production of information-processing equipment fell 0.2 percent. Production of consumer products rose 0.3 percent, led by autos, as output of other consumer durables fell. High-technology industries' July production rose 0.3 percent. In a separate report issued Friday, the Federal Reserve Bank of New York said its Empire State index moved higher to 2.8 in August, indicating that slightly more manufacturing firms said business was improving than said it was declining. The number of firms paying higher prices fell slightly.
