Led by Rise in Cars, SUVs, and Trucks Rolling off Assembly Lines
Industrial production (IP) rose by a solid 0.6% in July, close to our above consensus forecast. This is another clear indication, along with the strong 528K rise in July payroll jobs, that the U.S. economy is NOT in recession, despite the two consecutive quarters of small declines in real GDP. Indeed, real GDP growth is off to a solid start in the current quarter.
Total and manufacturing Capacity Utilization (CU) rose to 80.3% and 79.8% in July, respectively, close to their most recent April 2022 high points.
The biggest contribution to the July IP gain came from manufacturing production rising a strong 0.7%. Durable goods output rose 1.3% as motor vehicles assemblies (new cars, SUVs, and trucks rolling off the assembly lines) jumped by 6.6%. Apparently, semiconductor chip shortages are easing up allowing faster production of new vehicles. Nondurable manufacturing production rose a scant 0.1%.
Mining activity (oil, gas, coal, and minerals production) rose a solid 0.7%, as the oil and gas rig counts continue to rise close to pre-pandemic levels. The output of utilities surprisingly fell by 0.8%. Frankly, this seems very odd given the record-breaking heat wave in much of the country last month, which had air conditioners running night and day.
In summary, a strong rise in total and manufacturing output in July shows the third quarter real GDP is off to a solid start, despite a big drag this quarter from much weaker homebuilding and sales activity.
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