July factory output up more than forecast

Production jumped twice as much as forecast last month, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year.

Output climbed 1 percent as factories churned out more computers, appliances, automobiles and industrial machinery, the Federal Reserve said yesterday in Washington. Another report showed work began last month on fewer houses than forecast.

Increased business investment is propelling the gains in manufacturing, which accounts for 11 percent of the world's largest economy. At the same time, a slowdown in consumer spending will reduce the need to rebuild inventories, while cooling growth overseas may limit exports, meaning the pace of expansion will probably slacken.

"This is encouraging," said Lou Crandall, chief economist at Wrightson ICAP Llc in Jersey City, who forecast the jump in output. "This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly."

Output fell 0.1 percent in June, revised from a previously reported 0.1 percent increase.

Factory output, which makes up 75 percent of all production, rose 1.1 percent last month after falling 0.5 percent in June. Utility output increased 0.1 percent after a 2.3 percent jump the prior month. Mining production, which includes oil drilling, rose 0.9 percent.

Manufacturing got a boost from auto making as fewer factories shut for midyear retooling. Output of motor vehicles and parts surged 9.9 percent after falling 2.5 percent a month earlier. Excluding autos and parts, manufacturing still increased 0.6 percent after a 0.3 percent decline.

- Bloomberg News