US industrial output surges in June, but still below pre-Covid levels

Production at America's factories, utilities and mines surged last month, but remained well below pre-pandemic levels.

The Federal Reserve said Wednesday that US industrial production rose 5.4 per cent in June, the second straight monthly gain after a 1.4 per cent uptick in May. But it was still 10.9 per cent below the level in February before the economy virtually shut down in the face of the coronavirus.

The June performance was better than economists had forecasts and reflected the reopening of many parts of the US economy after lockdowns in the spring.

Despite the gains in May and June, industrial production dropped at a 42.6 per cent annual rate in the second quarter, worst since the American economy demobilised in the aftermath of World War II. Industrial production had plunged a record 12.7 per cent in April.

Factory production jumped 7.2 per cent in June. Production of cars and auto parts surged 105 per cent. Still, auto industry output remains nearly 25 per cent below February levels.

Production at utilities climbed 4.2 per cent last month as a rebounding economy drove up demand for power. But mining output sank 2.9 per cent, the fifth straight drop, pulled down by plummeting oil and gas production.

The rebound in industrial production may not last. A resurgence in Covid-19 cases is forcing governors in the South and West to pause or reverse the economic reopening.

The road to a full recovery will be much slower compared to the initial strong bounce of the past two months that was prompted by the relaxation of social distancing measures," Oren Klachkin and Gregory Daco of Oxford Economics wrote in a research note.

The virus' resurgence in many states in recent weeks has already led to the re-imposition of social distancing measures that will drag on the recovery and bolster already significant headwinds facing the industrial sector.