Industrial production rose in August by the most in six months, indicating U.S. manufacturing will contribute more to the expansion.
Output at factories, mines and utilities climbed 0.4% after no change the prior month, a report from the Federal Reserve showed today in Washington. The median forecast in a Bloomberg survey of 85 economists called for a 0.5% advance in August. Manufacturing, which makes up 75% of total production, advanced by the most this year.
The strongest vehicle sales in almost six years are propelling factory activity, encouraging companies such as Ford Motor Co. to boost plant capacity. A pickup in global markets and stronger consumer demand would help spark further progress in the sector that struggled earlier this year.
“Companies have to increase production in order to keep up with demand,” said Brett Ryan, a U.S. economist at Deutsche Bank Securities Inc. in New York, whose firm is the second-best forecaster of production for the past two years, according to data compiled by Bloomberg. “You have an elevated level of unfilled orders, so that bodes well for production.”
Manufacturing in the New York region expanded less than forecast in September even as orders and sales grew at a faster pace, separate data from the Federal Reserve Bank of New York showed. The bank’s general economic index eased to 6.3 from 8.2 last month. Readings greater than zero signal expansion in New York, northern New Jersey and southern Connecticut. A gauge of the six-month outlook advanced to the highest level since April 2012.
Stocks advanced after Lawrence Summers withdrew his bid to be the next Fed chairman and America and Russia agreed on a plan to remove Syria’s chemical weapons. The Standard & Poor’s 500 Index rose 0.8% to 1,701.58 at 9:48 a.m. in New York.
Estimates for industrial production in the Bloomberg survey ranged from a drop of 0.1% to an increase of 0.7%.
Manufacturing, which accounts for about 12% of the economy, climbed 0.7% after falling a revised 0.4%. July factory output was previously reported as a 0.1% drop.
Today’s Fed report also showed that capacity utilization, which measures the amount of plants that are in use, increased to 77.8% from 77.6% the prior month.
Utility output decreased 1.5%, the fifth straight drop. Mining production, which includes oil drilling, increased 0.3%.