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US factory output rose solid 0.3 per cent in July

Last Updated Aug 15, 2018 at 4:00 pm EDT

In this July 25, 2018, photo a truck driver chains down a roll of steel to his flatbed at the NUCOR Steel Gallatin plant in Ghent, Ky. The rolls, weighing as much as 20 tons, are transported one at a time. On Wednesday, Aug. 15, the Federal Reserve reports on U.S. industrial production for July. (AP Photo/Timothy D. Easley)

WASHINGTON – U.S. manufacturing output rose a solid 0.3 per cent last month, led by increased production of cars, electronics, and appliances.

The Federal Reserve said Wednesday that overall industrial production — which includes output at mines and utilities as well as factories — increased 0.1 per cent in July after climbing 1 per cent in June. Production slid 0.3 per cent at mines and 0.5 per cent at utilities.

Factory production has risen at a healthy pace this year, though economists worry that it may not last. President Donald Trump’s imposition of tariffs on steel imports and on $34 billion of products from China has sparked retaliatory duties, which may limit exports. And the dollar has increased in value against other currencies, which could further hurt exports by making U.S. products more expensive overseas.

“The appreciation of the dollar so far this year means that growth in the factory sector appears set to slow further over the coming months,” Michael Pearce, senior U.S. economist at Capital Economics, said in a research note.

The July reading for industrial production fell short of economists’ expectations. But it is still up 4.2 per cent from a year earlier. Despite the drop last month, mining has surged 12.9 per cent since July 2017.

American industry has looked relatively healthy despite trade conflicts with China, Europe and Canada, and a rising dollar that makes U.S. products more expensive abroad. Helped by tax cuts, the U.S. economy grew at a 4.1 per cent pace from April through June, fastest since 2014. Employers are hiring, and unemployment is 3.9 per cent, close to a 50-year low.

But manufacturers are coping with labour shortages and supply disruptions connected to the ongoing trade disputes. Among other things, U.S. tariffs on imported steel and aluminum are raising costs for many manufacturers.

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