Some of the gloom that settled over the US economic outlook as stocks and sentiment plunged in recent weeks may soon dissipate as households keep spending and factories keep producing.
Industrial output climbed in July by the most this year, according to figures released from the Federal Reserve on Tuesday. Reports last week showed retail sales rose by the most in four months and claims for jobless benefits dropped to the lowest level since early April.
"There's nothing in here to suggest the economy is slowing, let alone declining," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "Production continues, and production continues because consumers are still making their purchases."
Profits at companies ranging from Home Depot to Macy's are beating analysts' estimates as sales increase, showing household spending may be picking up after stalling in the second quarter. Cisco Systems shares soared last week as demand for its networking equipment improved, hinting at a pickup in business investment.
Tuesday's report from the Fed showed that the 0.9% increase in production at factories, mines and utilities followed a revised 0.4% gain that was more than previously estimated.
Production of automobiles and parts surged 5.2% last month, a rebound from the supply-chain disruptions that resulted following the March earthquake in Japan, the Fed report showed. Excluding motor vehicles, manufacturing climbed 0.3% after a 0.2% gain in the prior month.
Business equipment production rose 0.6% in July following a 0.2% gain in June. Output of computers and electronic products increased 0.5% after a 0.8% decline in June.
On the consumer side as well, retailers are benefiting as households continue to spend. Sales climbed 0.5% in July, the most in four months, following a 0.3% gain in June that was larger than previously estimated, according to commerce department figures released last week.
(In Exclusive Partnership with The Washington Post)