The numbers: U.S. industrial production rose a seasonally adjusted 0.9% in July, the Federal Reserve reported Tuesday. That’s a fastest pace since March and follows a revised 0.2% gain in June.

The gain was above Wall Street expectations of a 0.5% gain, according to a survey by the Wall Street Journal.

Despite the gains, production is still slightly below pre-crisis levels.

Capacity utilization rose to 76.1% in July, the highest rate since the pandemic struck last year. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities.  It’s still below the level of about 80% that could fan higher production costs and prices.

What happened: Manufacturing activity alone rose 1.4% in July, boosted by an 11.2% jump in output of motor vehicles and parts. Despite the gains, production of cars remains about 3.5% below its recent peak in January.

Excluding autos, manufacturing output rose 0.1%.

Output of utilities dropped 2.1% in July while mining production, which includes oil and gas, rose 1.2%.

Big picture: Factory sector activity keeps rising despite supply bottlenecks. The data this month was flattered by car makers not taking their usual summer break. Economists expect the sector to continue to expand although supply bottlenecks will remain a headwind.

What are they saying? “The manufacturing recovery continues, but it likely will moderate. The manufacturing recovery globally is moderating, and survey evidence shows that the U.S. is not immune,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Market reaction: Stocks
DJIA,
-0.73%

SPX,
-0.61%

opened lower on Tuesday on continued concern about the continued spread of the delta variant of Covid around the world and weak retail sales from last month.

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