The Manufacturing Upswing

There was much made yesterday of the fact that the producer price index showed an increase in July, tamping down fears of deflation. But it may be even more significant that the Federal Reserve' estimated industrial production rose by 1.0 percent in July, after having slipped by 0.1 percent in June. Manufacturing output was up 1.1 percent for July, after falling 0.5 percent in June.

The production of motor vehicles and parts was up a robust 10 percent on the month - the Fed credited the production of light trucks for most of the increase - but even excluding that, manufacturing production was up for the month. Every manufacturing segment was up, except for consumer nondurables, which were unchanged. Total industrial production was up 7.7 percent from July of 2009.

There are still many trouble spots in the economy: new housing permits fell in July, and the number of new housing starts missed the analysts' expectations, though it was still up slightly from June. But a turnaround in manufacturing, if it holds, could be strong news for this recovery.