Industrial companies boosted production more than expected in August, making more cars, clothing and other goods in the early stages of a broad economic recovery.
The Federal Reserve said Wednesday that output at the nation's factories, mines and utilities rose 0.8 percent in August. Economists surveyed by Thomson Reuters expected a 0.6 percent increase.
Last month's gain marked the second straight increase after the global recession dried up the appetites of customers worldwide.
Factories boosted production of cars, machinery, food products, clothing and other goods in a fairly broad-based pickup in August.
The Fed also said industrial production jumped 1 percent in July, twice as much as originally reported. Car production drove that gain.
Auto sales jumped due to the government's Cash for Clunkers program, which provided people with up to $4,500 for trading in less efficient gas guzzlers. With auto dealers facing thin inventories, manufacturers boosted production to meet a spurt in demand generated by the program.
Production at factories — the single-biggest slice of overall industrial activity — also rose for the second straight month. It posted a 0.6 percent gain in August, following a 1.4 percent rise in July.
Car production led the way, rising 5.5 percent last month. That followed a whopping 20.1 percent gain in July as General Motors and Chrysler reopened many plants that had been closed in May and June as the companies restructured and emerged from bankruptcy.
Even with production of autos and parts stripped out, manufacturing activity increased 0.4 percent last month.
Production of machinery rose 0.8 percent in August. Output for primary metals — including steel — increased 0.9 percent. Production of food, beverages and tobacco products jumped 1.6 percent. Production of apparel and leather goods rose 0.8 percent. Chemical production was up 0.7 percent.
Meanwhile, mining output rose 0.5 percent in August, following a 0.6 percent gain in July. Production at utilities jumped 1.9 percent, after a 1.6 percent drop in July as temperatures swung from an unseasonably mild to slightly warmer than usual in August.
With production rising, industrial companies idled less of their plants and equipment in August. The overall operating rate rose to 69.6 percent in, up from 69 percent in July.
Still, industrial companies are operating well below capacity. The operating capacity in August was 11.3 percentage points below its average between 1972 and 2008. A healthy level is around 80 percent.
Because companies still have a lot of their plants unused, that will be a force tamping down any inflation pressures.
Wednesday's fresh snapshot of industrial activity provides the latest evidence that the economy has entered a new phase: recovery.
Federal Reserve Chairman Ben Bernanke on Tuesday said the recession is probably over, although he warned that the pace of the recovery likely won't be strong enough to drive down the unemployment rate quickly.
Many analysts predict the economy is growing at a pace of at least 3 percent in the current July-September quarter.
Source: AP News
