Industrial production increased considerably in August, following an increase in production of motor vehicles and parts. Additionally, output related to utilities and mining also rose, which also supported the surge in manufacturing output.
Given these positive trends, the addition of mutual funds that have significant exposure to the industrials and utilities sector could be a prudent decision. Now, we will take a glance at the encouraging data that raised hopes for these sectors for the coming months.
Industrial Production Rebounds
Industrial production in August moved higher and July’s figure was also revised upward to 0.4%. The Board of Governors of the Federal Reserve System reported that industrial production increased 0.4% in August, exceeding the consensus expectation of a 0.3% increase. Output jumped 4.9% in the last 12 months, closing near the highest annual growth last seen in 2010.
Also, capacity utilization advanced from 77.9% to 78.1% last month. Although capacity utilization remained below its long-run (1972–2016) average by 1.7%, it posted growth of 1.7% in the last one year. Moreover, with recent economic data like ISM Manufacturing Index and new orders remaining upbeat, it is expected that economy will be able to expand output gradually.
Auto Output Touch Best Level Since April
Manufacturing output advanced, mainly on the back of a 4% increase in production of motor vehicles and parts. Motor vehicle assemblies climbed to 11.5 million units annually, its highest figure since April. Additionally, the utilities production rose 1.2%, while mining output advanced 0.7%. Increase in electricity usage in August boosted utilities production, while a sharp rise in oil and natural gas production benefited mining production.
Separately, the manufacturing index increased from 58.1% in July to 61.3% in August, scaling a two-month high, according to the Institute of Supply Management (ISM). The improvement was largely driven by strength in new orders, which jumped from 60.2% in July to 65.1% in August.
