WASHINGTON, Aug 16: US industry expanded output by a steeper-than-expected 0.5 per cent in July, data showed on Friday, fanning recovery hopes.

Manufacturers boosted production by 0.2 per cent, marking the third monthly increase, and utilities belted out 3.9 per cent more to keep air conditioners running in a sweltering summer, the Federal Reserve said.

Mining output, however, fell 0.4 per cent, it said.

The overall increase in US industrial production was more than twice the 0.2 per cent predicted by Wall Street analysts.

“The strong 0.5 per cent increase in July industrial production is welcome news,” said Manufacturers Alliance chief economist Daniel Meckstroth.

“Manufacturing production rose a smaller 0.2 per cent, but it has increased for the third month in a row, and these gains have made up ground lost in April,” he said.

“The forward momentum is led by heavy industries. Unfortunately, rising imports continue to sap the strength in non-durable goods,” he added.

But “signs of a pickup in consumer spending, low inventories, a declining dollar and rising business orders bode well for sustained industrial growth in the second half of this year and through 2004,” he said.

Auto and truck production rose 2.9 per cent in July. Production of high-tech equipment advanced 0.8 per cent. Business equipment output climbed 0.4 per cent, the third monthly increase.

Production is still down 1.4 per cent in the past year, however.

“The third consecutive increase in manufacturing output may be an indication that this sector is finally beginning to stabilize,” said Naroff Economic Advisors President Joel Naroff.

But Naroff said it was too early to get carried away.

“Production increased for the first eight months of 2002, but that didn’t mean that manufacturing was off and running. The sector proceeded to crater the last portion of the year. So caution is the catchword,” he said.

Output of durable goods — big-ticket items expected to last at least three years — rose while production of other goods, especially clothing and textiles, declined, Naroff said.

“But let’s look on the positive side,” he added.

“Production of commercial products, computers, semiconductors, business equipment, construction supplies, business supplies and materials all increased. Other than communications equipment, high technology is coming back.”—AFP