The American economy has been on a faster growth trajectory as depicted by rounds of encouraging data in recent months. The latest upbeat industrial production data bolstered the upbeat mood amid the US-China trade tariff chaos.

This is especially true as industrial production (a measure of output at factories, mines and utilities) rose 0.4% in August – the third consecutive month of increase – thanks to robust growth in manufacturing, mining and utilities output. With this, industrial production seems to be on track for its strongest annual growth since 2010, climbing 4.9% over the past 12 months.

Manufacturing output inched up 0.2% in August driven by a 4% rise in motor vehicles and parts. Automakers assembled vehicles at an annual rate of 11.54 million units — the strongest pace since April. Meanwhile, utilities output advanced 1.2% driven by a surge in electricity usage during the hot month while mining output rose 0.7% on higher production of oil and natural gas.

Overall industrial capacity utilization (a measure of how fully firms are using their resources) increased from 77.9% in July to 78.1% in August – the highest rate since April and below pre-recession levels of above 80%.

Solid Outlook

The manufacturing sector, which accounts for about 75% of the U.S. industrial production, has been gaining momentum since the start of 2017 on rising energy prices and historic tax cuts. The modest gain in August indicates tough time for manufacturers, who are struggling with a strong dollar, plateauing housing sector, and rising trade tensions. Notably, a strengthening dollar is making U.S. products more expensive abroad and is likely to weigh on the growth of factories in the coming months as well.

Additionally, the shortage of workers could also pose a risk to production and the tit-for-tat tariff threats suggest some crunch in the supply chain. Trump’s tariffs on imported steel and aluminum are raising costs for many manufacturers, taking a toll on the outlook for the industrial sector. He has already implemented tariff on $50 billion in Chinese goods leading to retaliation of the equivalent amount from China. He has threatened another $200 billion in tariffs as early as Sep 17 and the counterattack is expected from China once announced. Trump is also planning the third round of tariffs on an additional $267 billion of goods at a short notice.