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US factory output rises for 5th straight month in June, boosting economy after dismal 1Q

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WASHINGTON - U.S. factory output increased for the fifth straight month in June as manufacturers cranked out more aircraft, chemicals and furniture. The modest gain underscored manufacturing's role in helping return the economy to growth after a grim first quarter.

Factory production rose 0.1 per cent last month, the Federal Reserve said Wednesday, down from a gain of 0.4 per cent in the previous month. May's data was revised slightly lower, but April's reading was revised much higher.

Despite June's small increase, manufacturing output rose in the second quarter at the fastest pace in more than two years, providing a critical boost to the economy after it contracted sharply in the first three months of the year. Factory output climbed 6.7 per cent at an annual rate in the second quarter, the most in more than two years and up from just 1.4 per cent in the first quarter.

Overall industrial production, which includes manufacturing, mining and utilities, edged up 0.2 per cent in June, down from a 0.5 per cent gain in May.

Mining output, which includes oil and gas drilling, surged 0.8 per cent. Utility production fell 0.3 per cent, mostly reflecting weather patterns. Industrial production rose at an annual rate of 5.5 per cent in the second quarter, the best showing in nearly four years.

"The industrial economy is in reasonable shape but the recovery is steady rather than spectacular," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Most economists are optimistic that factory output will keep rising. The Federal Reserve Bank of New York said earlier this week that its regional manufacturing index reached a four-year high in July.

Americans are buying more cars and businesses are spending more on steel and other metals and computers. Auto sales reached an eight-year high in June. Auto production slipped last month, the Fed said, but that followed several months of strong gains.

Petroleum output fell, but mostly because of a temporary disruption at a large refinery, according to the Fed's report.

The government's jobs report earlier this month showed that factories added 16,000 positions in June, the most in four months, and the average work week for manufacturing employees remained at a post-recession high.

A survey earlier this month by the private Institute for Supply Management, meanwhile, found that manufacturing expanded in June for the 13th straight month, though at a slightly slower pace than the previous month. Growth was broad-based across nearly all the 18 sectors that the survey covers. The ISM is a trade group of purchasing managers.

The economy shrank 2.9 per cent at an annual rate in the first quarter, the worst showing in five years.

But most economists expect growth returned in the April-June quarter. On average, analysts forecast the economy grew at an annual pace of 3 per cent in the second quarter, according to a survey by the National Association for Business Economics. While healthy, that's down from a 3.5 per cent forecast a month earlier.

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Follow Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber

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