Industrial production gets a much needed lift from motor vehicle "surge"

A 10.6 percent surge in motor vehicle production gave a very significant lift to industrial production which rose 0.6 percent in July. The manufacturing component, which has been flat all year, jumped 0.8 percent. Excluding vehicles, however, manufacturing rose only 0.1 percent. The lack of strength here is the result of business equipment which edged only 0.1 percent higher after declining 0.2 percent in June.

The rise in production drove capacity utilization up 3 tenths to 78.0 percent which is where it was back in April. Capacity utilization for manufacturing rose 5 tenths to 76.2 percent.

The two non-manufacturing components are mixed. Production at utilities, due to July's cool weather, fell 1.0 percent with capacity utilization down 8 tenths to 79.1 percent, while mining production rose 0.2 percent with capacity utilization down 1 tenth to 84.4 percent.

Weak foreign demand and weakness in the energy sector may be hurting much of the industrial sector but these factors are not at play in the domestic auto industry. The readings in today's report are mixed but the headline gain, driven by the convincing strength for autos, is an eye catcher and will certainly be ammunition for the hawks at next month's FOMC meeting.