Data released on Tuesday showed Industrial Production rose 0.6% in July in the US, surpassing expectations. Analysts at Wells Fargo point out that the jump in industrial production was due largely to a surge in auto production but also came with upward revisions that lessened the June decline in manufacturing output. They consider sustained production growth will require continued demand for durable goods and improvement in supply chains; “both look iffy at the moment”.

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“Industrial production notched a solid 0.6% increase in July. The non-manufacturing output measures more-or-less canceled one another out. Mining output rose 0.7% and utilities output sank 0.8%. So the headline gain is mostly a function of what happened in terms of factory output.”

“The auto industry has been particularly affected by these struggles and even as the economy cools, there is still pent-up demand for certain vehicle models.”

“Other manufacturing data point to slower activity ahead. The new orders component of the ISM manufacturing index slipped further into contraction territory in July, and this component tends to track industrial production relatively well.”

“We continue to expect manufacturing activity will hold up a bit better than other parts of the economy, but we see a slower pace of activity ahead. Thawing supply chains could help facilitate easier production, but a full normalization still looks a ways off. The dent to optimism from mounting recession fears, a pullback in consumers' demand for goods and tighter financial conditions will all also likely pressure businesses desire for capital outlays.”