U.S. industrial production in June posted the largest monthly gain since 1959, indicating manufacturing is stirring to life after coronavirus-related shutdowns.
Total output at factories, mines and utilities increased 5.4% from the prior month after climbing 1.4% in May, Federal Reserve data showed Wednesday. The median projection in a Bloomberg survey of economists called for a 4.3% advance. Factory output jumped 7.2%, the biggest gain since 1946.
The outsize rebound in production still leaves the Fed’s index of industrial output 10.9% below pre-pandemic levels and the capacity utilization rate shows plenty of slack as demand builds only gradually. What’s more, sales may be tempered in coming months as reopenings have entered a more uncertain phase, with states like California imposing renewed lockdown measures.
In the second quarter, industrial production fell an annualized 42.6%, the biggest setback in the post World War II era.
Capacity utilization, which measures the amount of a plant in use, increased to 68.6% from a revised 65.1% in May; it was 76.8% in February. Extra capacity can weigh on corporate profits because business capital is underutilized, and it also signals a sluggish capital spending outlook.
The increase in factory output was led largely by vehicle and parts output, which surged 105%. Excluding auto production, factory output rose 3.9% as all major industries registered gains for the month.
The Fed’s report showed utility output increased 4.2%, while mining dropped 2.9%, the fifth straight monthly decrease. Oil and gas well drilling declined 18% after a 36.9% slide a month earlier. Drilling is down a whopping 70% from a year earlier after a slump in oil prices several months ago prompted cutbacks in exploration.
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