Will Increased US Industrial Production Drive Growth in 2Q16?
US industrial production improved in June
According to a report provided by the Federal Reserve, US industrial production increased by 0.6% in June 2016 compared to a 0.3% fall in the previous month. It beat market expectations of a 0.2% rise, and it was the biggest rise since July 2015.
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Industrial production reflects the performances of the manufacturing, mining, and utilities sectors. The increase in industrial production in the United States (QQQ) (IVV) (VOO) indicates that output from the manufacturing, mining, and utilities sectors showed improvement in June.
Manufacturing output rose by 0.4%, production of durables output rose by 0.9%, and production of non-durables fell by 0.1% in June. Mining output rose by 0.2% in June.
Impact on the economy
The rise in industrial production is a positive sign for the economy. It signifies that the major backbones of the economy, including manufacturing, mining, and utilities, are driving economic growth. Improving figures indicate that the economy may see improvement in 2Q16.
Northwestern Mutual’s CEO John Schlifske is modestly optimistic about the US economy (VFINX) (SPXL) (IWF). According to him, personal income could be on a growth trajectory going forward, which could speed up personal spending.
Consumer spending is an important factor behind economic growth. US personal income rose by 0.2% in May 2016. In April 2016, it rose by 0.5%. Retail sales also posted their biggest gain in April 2016, indicating that consumer confidence was improving in the economy.
In the next part of this series, we’ll analyze the performance of China’s GDP growth in 2Q16.