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U.S. manufacturing turns positive in June

July 16, 2013|By Don Lee
(Orlin Wagner / Associated…)

 WASHINGTON -- After stumblng in the spring, the American manufacturing sector looks to be on stronger footing heading into the second half of this year.

Industrial production rose 0.3% in June, in line with analysts' expectations, after falling by that much in April and no growth in May, the Federal Reserve said Tuesday.

The increase last month reflected strong gains in automotive, home electronics and industrial machinery. That suggests improving demand from both consumers and businesses, although production of information-processing goods fell in June from the previous month.

Output of space and defense equipment rose 0.1% in June, the first monthly advance for the category in 2013. The Fed's overall industrial production index also was boosted by stronger mining activity.

On the whole, the American industrial sector didn't have a good second quarter; manufacturing output dropped at an annual rate of 0.2% after jumpign 5.1% in the first quarter. The economy expanded by 1.8% in the first quarter and grew by probably less than 1% in the second quarter.

"Clearly, manufacturing production growth significantly outpaced overall economic growth early this year and has recently been correcting to the relatively slow pace of growth in the overall economy," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation.

Looking ahead, U.S. factories still face weak overseas prospects -- with the Eurozone in its second year of recession and China and other emerging market economies growing more slowly. What's more, federal spending cuts in the U.S. under the so-called sequestration will further constrain demand. 

Nonetheless, the latest monthly data from the Fed encouraged analysts because they suggested that the spring slump in production had hit bottom and that manufacturing won't be a drag on economic growth in the second half of the year, said Paul Dales, a senior economist at Capital Economics.

"This may reassure some [Fed] officials who want to see signs of a pick-up in economic growth before slowing the pace of the Fed’s monthly asset purchases," Dales wrote, referring to the central bank's bond-buying stimulus, which is widely expected to be reduced later this year as long as the economy and labor market continue to improve.


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