As more businesses in the United States reopened, U.S. industrial production and manufacturing output grew by 5.4% and 7.2% respectively in June, according to data released Wednesday by the Federal Reserve. The increase marks the second month in a row of growth for these indicators after a massive decline in April. However, given the resurgence in coronavirus infections that began in late June, it is uncertain if the increase in manufacturing activity can be sustained in the second half of the year.
The June increase in production was primarily driven by a triple-digit increase in auto industry production. This is notable, but we also need to keep in mind that automakers only restarted activity in the second half of May and production is still recovering from extremely low levels. Other major sectors in industrials that registered notable increases in production are the machinery, computer and electronic products, and nonmetallic mineral product sectors. While industrial production moved in a positive direction last month, the rebound levels are still below pre-COVID-19 levels. Capacity utilization levels, while improving, are still lower than they were before the crisis, putting pressure on corporate profits and mid-term investments.
The uncertainty in the length and depth of the pandemic impact is the biggest drag on the extent and duration of recovery. Manufacturing output remains roughly 11% below February’s levels, suggesting that a return to pre-crisis levels of operations is unlikely for some time.
