U.S. industrial output rises modestly, powered by factories

WASHINGTON (Reuters) - U.S. industrial production edged higher in July, boosted by higher manufacturing output in a positive sign for economic growth.

The Federal Reserve said on Wednesday industrial production rose 0.1 percent last month after an upwardly revised 1.0 percent increase in June.

Economists polled by Reuters had forecast industrial production rising 0.3 percent last month after a previously reported 0.6 percent increase in June.

Manufacturing output rose 0.3 percent in July, in line with analyst forecasts. Motor vehicle production rose 0.9 percent while output of machinery expanded 0.6 percent and computers and electronics grew 1.3 percent.

The data appeared to show U.S. factories weathering the early days of an escalation of a U.S. trade war with China. The Trump administration raised tariffs on a range of Chinese imports in July, triggering retaliatory tariffs from Beijing on U.S. exports.

Manufacturing, which accounts for about 12 percent of the economy, is still being supported by a strong domestic and global economy. But many economists see a risk that escalating trade tensions could undercut business investment.

Mining production fell 0.3 percent in July, with oil and gas well drilling down 4.3 percent. Utilities output dropped 0.5 percent in July.

With overall industrial production posting only a slight gain, capacity utilization, a measure of how fully firms are using their resources, held steady last month at 78.1 percent. It is 1.7 percentage points below its 1972-to-2017 average.

Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy — how far growth has room to run before it becomes inflationary.

(Reporting by Jason Lange; Editing by Andrea Ricci)

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