US industrial production may increase for first time in 7 months in June

Energy Associated Press

The Federal Reserve releases its industrial production report for June on Wednesday at 9:15 a.m. Eastern.

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SMALL INCREASE: Economists forecast that industrial production rose 0.2 percent in June, after falling by the same amount in May, according to a survey by FactSet.

That would be the first increase since November. Industrial output has either fallen or remained flat in the six months since then.

Within industrial production, the more important manufacturing sector also saw production fall 0.2 percent in May, after a 0.1 percent increase in March. Industrial production also includes mining output, which fell 0.3 percent in May, its fifth straight fall, and utility production, which rose 0.2 percent.

FACTORIES IMPROVING?: Manufacturers have struggled this year, partly because of harsh winter weather in January and February. But factories have also struggled because of the strong dollar, weak overseas economies, and cheaper oil.

The dollar has 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.

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And falling oil prices have caused refiners to lower petroleum production, which has weighed on factory output. Oil drillers have also 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.

But there are signs that manufacturers are adjusting to these changes and slowly boosting output. That could help manufacturing contribute to a stronger economy this year.

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.

Auto sales also 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 declined in June but remained at a healthy pace. The National Automobile Dealers Association now forecasts that car sales will top 17 million this year for the first time since 2001.