The worst may be over for America's manufacturers. Production figures issued yesterday showed a solid second quarter after a long struggle during the global financial crisis.
The Federal Reserve reported that a modest rise in industrial production last month helped give manufacturing its best three months in more than a year. Economists hailed it as a sign of recovery after hard times that included the loss of 488,000 jobs since March 1998.
Output at the nation's factories, mines and utilities posted a 0.2 percent rate of increase in June, matching the gain in May.
June's performance left industrial output rising at an annual rate of 3.9 percent in the second quarter, the best showing since the end of 1997. "I think manufacturing is back again," said Wells Fargo economist Sung Won Sohn. "I think the worst is over."
The manufacturing sector has been struggling for the past two years with the global financial crisis, which has cut sharply into U.S. exports while triggering a flood of cheaper foreign goods into the U.S. market, economists said.
"Manufacturing is making a moderate comeback from the problems posed by the global economic turmoil over the last two years," said Mark Zandi, an economist with Regional Financial Associates. "It's not roaring back, but there are modest gains."
Economists attributed the good news mainly to a gradual pickup in demand for U.S. goods from other countries that are now slowly recovering from the global financial crisis.
In 1998, industrial output rose 2.3 percent, down from a 7.2 percent increase the year before, Merrill Lynch economist Stan Shipley said. He forecast a gain this year of 3 percent to 3.5 percent, representing a modest pickup from 1998.
Even though industrial output edged up in June, the manufacturing sector continued to lose jobs. Economists said productivity gains -- largely through computers and other technological improvements in the workplace -- help explain why output rose even as jobs were cut.
The Fed said the strength in industrial output in June was led by a 2.7 percent increase in the production of cars and trucks, a gain almost as strong as the 3 percent rise in May.
The nation's factories, mines and utilities operated at 80.3 percent of capacity in June, down slightly from a May operating rate of 80.4 percent.
CAPTION: SIGN OF RECOVERY (This graphic was not available)