Healthy Manufacturing Sector Supports Strong American Economic Market Forecasts

Manufacturing, Output, Automobile, August, Economy, Factory OutputAmerican manufacturing output increased noticeably in July. Automobile production notched its biggest uptick in five years, giving the economy a much needed impetus at the beginning of the third quarter.

While another data published mid-August, exhibited a bit of cooling in respect of factory output in New York state, many economists subscribed to the view that it does not change the economic view with proven momentum. They noted that the rebound was preceded by a strong July increase.

Sustainable increase

According to Millan Mulraine, Chief Economist, TD Securities, the wide nature of manufacturing gains shows that a robust rebound of the economy in the second quarter will continue. Factory production, as per Federal Reserve data, spurted 1.0 percent in July after it increased in June to the tune of 0.3 percent. It is the biggest gain from February and is a reflection of increase throughout the important categories.

Automobile production increased by 10.1 percent. It was the sharpest spurt witnessed since July 2009. Strong gains were also observed in machinery production. Electronic goods and computer manufacturing also increased, supporting the views of many economists that business investment will get a pick up this quarter. A more robust pace in business investment is needed to make sure that economic growth is sustained.

The economy increased at 4 percent annual rate through second quarter. Current forecasts fix third quarter growth rate within the 2.5 to 3.0 percent range. The utilization of industrial capacity, a measure of firms fully capitalizing their resources, hit peak levels from February 2008.

Influence of external factors

Manufacturing’s excellent rise and mining output’s of 0.3 percent increase assisted the offsetting of decline by 3.4 percent in the production of utilities due to hostile weather conditions. Empirical industrial production rose 0.4 percent in the previous month (July).

The financial markets of America, however, were not affected by the growth. Traders took note of Ukraine-centric events.

In another report, New York Fed announced that the standard business conditions of “Empire State” index dropped to 14.69 percent in August from July’s 25.60 percent. There was also a decrease in the pace of new orders, but an inventory decline pointed to acceleration in the activity near future. Though a rise has been witnessed in the manufacturing sector, there are no expectations of any increase in factory gate inflation pressure.

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