Factory production flat for June
WASHINGTON – U.S. factory production was unchanged for a second straight month in June as a sharp drop in auto manufacturing was offset by greater output of furniture and chemicals.
The cutback in auto production comes after three months of healthy gains and is likely temporary. Still, manufacturers are struggling to overcome several challenges, including the strong dollar, weak overseas growth and cheaper oil. Sales at retail stores also fell in June, suggesting consumers are still cautious about spending, limiting demand for factory goods.
The Federal Reserve said Wednesday overall industrial production, which includes mining output and utilities, as well as manufacturing, rose 0.3 percent, the best showing since November. Mining, which includes oil and gas wells, rose 1 percent, as oil output increased. Utility output jumped 1.5 percent, the most since February, as people ramped up air conditioning in the summer.
Auto production fell 3.7 percent, likely reflecting a slowdown in sales in June. Yet, car purchases remain healthy. They reached an annual pace of 17.8 million in May, the highest in a decade, according to industry analyst Autodata Corp. Sales fell back to a 17.2 million pace in June. The National Automobile Dealers Association now forecasts car sales will top 17 million this year for the first time since 2001.
Outside autos, manufacturers struggled this year and added little to growth, partly because of harsh winter weather in January and February. But factories faced other challenges, such as the strong dollar, weak overseas economies and cheaper oil.
The dollar increased about 14 percent against a basket of overseas currencies in the past 12 months. That makes U.S. goods more expensive overseas, cutting into exports.
And falling oil prices caused oil drillers to cut back on their purchases of steel pipe and other equipment. Oil prices fell to $53 a barrel this month from $60 in the spring. Prices topped $100 a barrel a year ago.
There is some evidence the decline in oil and gas drilling is bottoming out. New drilling fell 3.7 percent in June, the Fed said, though that was the smallest decline since December.
There are other signs manufacturers are adjusting to these changes and slowly boosting output.
U.S. factories expanded at a faster pace in June for the second straight month, according to a survey of purchasing executives by the Institute for Supply Management, a trade group. Its index of manufacturing activity rose to 53.5 last month from 52.8 in May. That’s the highest reading since January. Any figure above 50 signals expansion.