Industrial production climbs

The output of motor vehicles and parts decreased 0.3 percent in June after a 1.9 percent surge a month earlier, today’s report showed. Factory output excluding vehicle and parts production rose 0.2 percent last month.

Industry sales data indicate factory lines will remain busy. Cars and light trucks sold at a 16.9 million annualized pace in June, the strongest since July 2006, after a 16.7 million rate in May, according to data from Ward’s Automotive Group. Such demand helps explains why automakers such as Ford Motor Co. (NYSE:F) are upbeat about prospects for the second half of 2014.

Consumer spending

“We’ve seen very good improvements in manufacturing activity,” Ellen Hughes-Cromwick, Dearborn, Michigan-based Ford’s chief economist, said on a July 1 sales and revenue call. “Credit channels are very constructive for the consumer now, with a still low interest rate environment.”

Ford isn’t alone in seeing improvements. Office furniture maker Steelcase Inc. (NYSE:SCS) has reported stronger demand as companies grow more upbeat about the outlook for the economy.

“Through the first three weeks of June, orders have grown at a low-single digit percentage,” in the Americas, Chief Financial Officer David Sylvester said in a June 26 earnings call for the Grand Rapids, Michigan-based company. “We experienced order growth in the technical, professional, manufacturing, energy, information technology and insurance services sectors.”

American factories received more orders for business equipment in May, according to the Commerce Department, pointing to gains in investment that will probably help the economy snap back after contracting in the first quarter. Bookings for capital goods such as computers rose 0.7 percent.

Business investment

Capital spending on equipment fell at a 2.8 percent rate during the first quarter. Gross domestic product shrank at a 2.9 percent annualized rate, the biggest decline since the depths of the recession in early 2009.

The downturn in GDP reflected a slowdown in the pace of inventory growth, setting the stage for stronger production as consumer purchases pick up.

Building on progress in the labor market, households are still spending. Retail sales showed a broad-based gain in June, with purchases climbing 0.2 percent after a 0.5 percent advance in May that was larger than previously reported, Commerce Department figures showed yesterday.

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