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Industrial production in the U.S. increased by much more than expected in the month of July, according to a report released by the Federal Reserve on Tuesday.

The Fed said industrial production advanced by 0.9 percent in July after edging up by a downwardly revised 0.2 percent in June.

Economists had expected industrial production to rise by 0.4 percent, matching the increase originally reported for the previous month.

The report showed manufacturing output surged up by 1.4 percent in July after dipping by 0.3 percent in June, reflecting an 11.2 percent spike in the production of motor vehicles and parts.

The Fed said a number of vehicle manufacturers trimmed or canceled their typical July shutdowns but noted vehicle assemblies continued to be constrained by a persistent shortage of semiconductors.

Mining output also jumped by 1.2 percent in July after rising by 0.5 percent in June, while utilities output tumbled by 2.1 percent after soaring by 3.1 percent in the previous month.

“Tailwinds from upbeat goods demand, rising business investment, and strengthening global growth will keep industrial production on a firm expansionary path,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

“Forward-looking data signal there’s still plenty of activity in the pipeline yet to be released,” he added. “We expect supply chain and hiring challenges to slowly diminish, but the Delta variant risks strengthening those headwinds.”

The report also showed capacity utilization for the industrial sector climbed to 76.1 in July from 75.4 in June. Economists had expected capacity utilization to rise to 75.7 percent.

Capacity utilization in the manufacturing and mining sectors increased to 76.6 percent and 76.9 percent, respectively, while capacity utilization in the utilities sector fell to 72.6 percent.


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