Economic Watch: Factory Activity, Wholesale Prices, Consumer Confidence
The amount of activity at the nation’s factories, mines and utilities turned in its best performance in eight months during July, according to a new Federal Reserve report on Friday.


The amount of activity at the nation’s factories, mines and utilities turned in its best performance in eight months during July, thanks to a surge in auto production.
Industrial production increased 0.6% in July after moving up 0.1% in June, reported the U.S. Federal Reserve Friday.
The 0.8% increase in manufacturing activity was due in large part to a surge in auto production. The output of motor vehicles and parts jumped 10.6%, while production elsewhere in manufacturing edged up just 0.1%.
Activity in mining rose 0.2% while utilities fell 1%.
At 107.5% of its 2012 average, total industrial production in July was 1.3% above its year-earlier level.
Several analysts were quick to point out the impact of the July performance was muted by downward revisions from earlier months.
Capacity utilization for the industrial sector increased 0.3 of a percentage point in July to 78%, a rate that is 2.1 percentage points below its 1972–2014 average. However, capacity utilization in the factory sector alone hit its highest level since last December at 76.2%.
Wholesale Price Increase
A separate report showed prices at the wholesale level increased 0.2% in July from the month before, the third straight monthly increase, according to the U.S. Labor Department, but inflation remains relatively weak thanks to falling energy prices.
The overall cost of services posted an increase of 0.4% while product costs fell 0.1%.
When volatile food and energy prices in the Producer Price Index are stripped away, “core prices” increased 0.3%. Energy prices declined 0.6% in July after climbing 2.4% the month before, as food prices fell 0.1% following a 0.6% gain.
Compared to a year ago the overall PPI is down 0.8%, the sixth straight 12-month decline, while core prices have advanced 0.6%.
The annual level is below the Federal Reserve’s annual target of 2% which it says is needed before it will push near-zero interest rates higher, but Stifel Fixed Income Chief Economist Lindsey Piegza said there will still be some who will push for a rate hike.
“While the hawks may choose to focus on the unexpected 0.2% monthly increase, the doves have an equally fueled argument to urge patience as the annual rate of inflation reaffirms a deflationary scenario,” she said. “Looking ahead there appears to be further downward price pressure in the pipeline as a result of slowing global demand, and of course, the recent devaluation of the yuan is likely to only exacerbate that pressure on commodity prices.”
Confidence Unchanged
Finally, a third report on Friday showed consumer confidence was virtually unchanged in early August from the July reading, marking its highest nine-month average since 2004.
The University of Michigan Survey of Consumers registered 92.9, a 12.6% improvement from the same time last year.
It also showed consumers’ feelings about current economic conditions and their expectations were nearly the same this month as they were in July. However, feelcings about current economic conditions rose 7.3% compared to a year ago, while expectations rose by 17.5% year over year.
“Renewed strength in personal finances largely offset slight declines in prospects for the national economy and buying conditions,” said Richard Curtin, the survey’s chief economist. “The declines in prospects for the economy probably reflect the expected increases in interest rates, while the eventual but small impacts from falling commodity prices, the devaluation of the Chinese yuan, and a weaker global economy have yet to occur, other than from declines in oil prices.”
He said the most important offset to these concerns is that consumption expenditures can be expected to expand at an annual rate of 3% in 2015 and 2016, prompting continuing net gains in jobs and incomes.
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