Factory production in U.S. was little changed for second month

A file picture of a technician tapping a thread into an exhaust casing at the Mitsubishi-Hitachi Power Systems America plant in Pooler, Georgia, U.S., on July 9, 2015. Factory output in the U.S. was little changed in June for a second month, held bac
A file picture of a technician tapping a thread into an exhaust casing at the Mitsubishi-Hitachi Power Systems America plant in Pooler, Georgia, U.S., on July 9, 2015. Factory output in the U.S. was little changed in June for a second month, held back by a decline in motor vehicle production. PHOTO: BLOOMBERG

WASHINGTON (BLOOMBERG) - Factory output in the United States was little changed in June for a second month, held back by a decline in motor vehicle production.

Manufacturing last month excluding the output of automobiles rose 0.3 per cent after a 0.1 per cent decline, the Federal Reserve's report showed Wednesday. Total industrial production, which also includes mines and utilities, climbed 0.3 per cent after a 0.2 per cent decrease.

A recovery in manufacturing will probably take time as factories contend with the dollar's advance, soft overseas markets and limited business spending in the wake of slumping oil prices. A faster pace of output would help improve prospects for a stronger economy.

"We expect manufacturing to grow," Millan Mulraine, deputy head of U.S. research and strategy at TD Securities LLC in New York, said before the report. "Once we move beyond the middle of the year, we should see more buoyancy in industrial production."

Utility output increased 1.5 per cent after a 1.2 per cent gain the previous month.

Mining production, which includes oil drilling, advanced 1 percent after falling 2.1 per cent. Oil and gas well drilling decreased 3.7 per cent following an 8.7 per cent plunge.

The median forecasts in a Bloomberg survey of economists called for a 0.2 per cent gain in industrial production and a 0.1 per cent gain in factory output.

For manufacturing, which makes up 75 per cent of total production and accounts for about 12 per cent of the economy, the May reading was revised from a 0.2 per cent drop.

The Fed report also showed capacity utilization, which measures the amount of a plant that is in use, climbed to 78.4 per cent from 78.2 per cent the prior month.

The output of motor vehicles and parts decreased 3.7 per cent after a 2.3 per cent increase a month earlier. Excluding autos and parts, total industrial production rose 0.5 per cent, the first gain in four months.

Vehicle demand, while slower in the most recent tally, remains a mainstay for factories. Purchases of cars and light trucks posted a 17.1 million annualized rate in June after 17.7 million a month earlier, according to Ward's Automotive Group. It capped the strongest quarter since 2005.

"We feel really good about the current environment," Katharine Kenny, vice president of investor relations at Richmond, Virginia-based used-vehicle retailer CarMax Inc., said at a June 24 conference.

Production of machinery and construction materials both dropped 0.1 per cent in June, the report showed. Consumer goods output was unchanged, while production of business equipment increased 0.4 per cent.

Other reports indicate the industry is starting to see a slight improvement. The Institute for Supply Management said its June factory index increased to 53.5, the best reading in five months, according to figures released July 1.

Progress in the job market is helping underpin household spending, which accounts for about 70 per cent of the economy. Employers added 223,000 workers to payrolls in June, and the unemployment rate fell to the lowest level in more than seven years.

Some reports have given less cause for optimism. Retail sales unexpectedly fell 0.3 per cent in June after a 1 per cent May advance that was smaller than previously estimated, Commerce Department figures showed Tuesday.

Weakness overseas is weighing on exports, which declined in May by the most in three months. The dollar's advance since June 2014 has made U.S. goods more expensive for foreign customers.

Capital investment may also take time to recoup the slowdown following the more than 45 percent plunge in oil prices in the past year.