NEW YORK (CNN/Money) - Industrial production in the United States rose in July, the Federal Reserve said Tuesday, as the manufacturing sector continued to build strength amid a sluggish recovery in the broader economy.
The Federal Reserve said production rose 0.2 percent last month after a revised 0.7 percent gain in June, while factories used only 76.1 percent of their capacity, matching June's capacity use. Economists, on average, expected production to be flat and capacity use of 76 percent in July, according to Briefing.com.
It was the seventh straight month of gains for industrial production, and it helped to dispel fears that the dismal performance of the stock market in July would somehow bleed into other sectors of the economy -- manufacturing, at least, was not badly impacted.
"This is confirming the idea that, while the stock market's not in good shape, the overall economy's not in bad shape; it's nowhere near going into a double dip," said Ken Goldstein, economist at the Conference Board.
U.S. stock prices were higher in early trading, while Treasury bond prices fell.
Fears of the economy "double-dipping" back into a recession that the National Bureau of Economic Research said began in March 2001 led many on Wall Street to clamor for the Fed to cut its target for short-term interest rates when policy makers met this week.
The Fed left rates alone, while acknowledging that the economy was at risk of weakness, and positive data such as Thursday's production report could help justify that decision.
"The Fed's inaction suggests that [policy makers] expect a quick rebound -- we do too -- which is why the next round of survey data, starting with today's Philly Fed, is so important," Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., said in a research note.
Manufacturing production increased 0.1 percent, while output of durable goods rose 0.5 percent. Output of non-durable goods fell 0.5 percent, while output of business equipment and construction supplies each fell 0.1 percent.
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