US June Industrial Production Surges on Vehicles

Industrial production, released by the US Federal Reserve Wednesday, rose by 5.4% in June, above the 4.3% gain expected, with the re-opening of motor vehicle plants the key factor for the second straight month. The Fed reported that industrial production was down 42.6% at an annual rate in the second quarter, the largest quarterly decline since the period immediately following World War II.

Manufacturing production rose by 7.2%, well above the 5.5% gain expected. Motor vehicle production rose by 105.0% after a 120.0% gain in May, continuing the recovery in the sector. The index for motor vehicles sits at 98.8 in June, still well below the pre-COVID 130.7 reading in February.

Excluding motor vehicles, overall industrial production would have been still been up 2.9% and manufacturing production would have been up 3.9%, reflecting strength in other manufacturing sectors. Utilities production rose by 4.2%, with electricity production up 4.6% and natural gas production up 2.1%. Mining production fell by 2.9%, continuing the string of declines that has put the measure 16.9% below its year ago level.

In other data released Wednesday morning, the July Empire State index showed positive manufacturing growth in the region for the first time since the COVID crisis began. The overall index rose to 17.2 from -0.2 in June, well above the 8.9 reading expected. The new orders index rose to 13.9 from -0.6, while the shipments reading rose to 18.5 from 3.3.

The six-month outlook fell to 38.4 from 56.5 in June, suggesting further improvement is expected by the end of the year, but with less optimism than previously thought.

The Philadelphia Fed index for July will be released Thursday morning and is expected to slip back to 20.0 after rising to 27.5, still indicating solid growth.

Also released Wednesday, the BLS’s import price index rose by 1.4% in June and was still up 0.3% excluding fuel prices.

There were price gains for other industrial products, capital goods, and consumer goods that offset lower prices for food and autos. Even with the June increase, the year/year rate for overall import prices was still down 3.8%, with non-fuel imports down 0.2%.

Also Wednesday, the Mortgage Bankers Association reported mortgage applications rose 5.1% in the July 10 week and are 61.1% above a year earlier. Refinance activity rose 11.9% and is 106.6% above a year earlier. Purchases were down 6.1% but are still up 15.5% over the year. The 30-year mortgage fixed rate fell to record low 3.19% from 3.26% in the previous week.


Colin Lambert

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