Computer and semiconductor production in U.S. factories continued to rise in July, but communications equipment output declined for the fourth month.

Computer, peripherals and storage production increased 1.6 percent in July and was 21.9 percent above last July. The computer production gains were helped by the recent federal tax cut in the home market, which is now raising employment in office-based industries in the enterprise market. But those gains continue to be restrained in the export market by near-recession conditions in Europe and the undervalued Chinese currency.

Semiconductor and component output rose 2.2 percent in July and was 15.9 percent higher than July 2002. Telecom equipment production dropped 2.2 percent in June to 8.8 percent below last July. The computer and semiconductor estimates are a combination of both more parts and more content per part, while the telecom estimates are largely a parts count.

Total U.S. manufacturing production rose 0.2 percent in June, the third consecutive increase. Production rose in all of the key end markets. Motor vehicle output was up 2.9 percent, home electronics 4.2 percent and industrial machinery 0.4 percent.

The rising trend in manufacturing is expected to continue, strengthening slightly by year’s end and at a quicker pace next year. It is being driven by both small rises in business equipment orders stemming from much-improved business confidence and by a surge in U.S. consumer spending spurred by the tax cut. Retail sales increased at an 18 percent annual rate in July