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US industrial output grows for the first time in nine months

15 August 2009 08:05 (UTC +04:00)

Baku-APA-Economics. US industrial output gained for the first time in nine months in July and inflation remained muted, but consumer confidence was unexpectedly weak this month, according to reports on Friday.

As Reuters reported, Industrial production rose more than expected in July, supporting hopes the longest recession since the 1930s was finally drawing to a close. Aside from a hurricane-related rebound in October 2008, this was the first monthly increase since December 2007, which marked the start of the current recession. Industrial production rose 0.5%, stronger than the 0.3% that economists polled by Reuters had expected and well above Juneâ€™s 0.4% decline.

Manufacturing output rose 1% in July, mostly because of a jump in motor vehicle assemblies which rose to an annual rate of 5.9 million units in July from 4.1 million in June. Auto sales got a big boost from the governmentâ€™s â€œcash for clunkersâ€ programme, which provides incentives to buy new cars. The programmess initial $1 billion funding was exhausted in its first week, and it has since been expanded to $3 billion.

Excluding motor vehicles and parts, industrial output fell 0.1% in July. The capacity utilisation rate, a measure of slack in the economy, edged up to 68.5%, slightly higher than economists had expected but still 12.4 percentage points below the 1972-to-2008 average. The output of utilities fell 2.4%, reflecting unseasonably mild temperatures in July, while mining output rose 0.8%.

Meanwhile, US consumer prices were flat in July versus June, but fell over the past 12 months by the most since 1950, according to government data that suggested benign inflation pressure even amid signs the recession may be winding down. The Labor Department said on Friday its Consumer Price Index was unchanged after rising 0.7% in June, in line with market forecasts for a flat reading. Gasoline prices fell 0.8% after jumping 17.3% the previous month, helping to keep overall prices contained. The food index declined 0.3%, the biggest fall since May 2002, after being flat in June, while prices for apparel and new vehicles rose in July.

Compared to the same period last year, consumer prices fell 2.1%, the largest decline since January 1950, reflecting the huge drop in oil prices since last yearâ€™s peak.

â€œIt is a sign that inflation is not a threat yet, thereâ€™s been some talk of inflation down the road. Itâ€™s something to be optimistic about,â€ said Terry Morris, senior equity manager at National Penn Investors Trust Company. Even as the worst recession since the Great Depression starts to bottom, inflation pressures will likely remain contained given high unemployment and weak demand, analysts said.