Computer and electronics unit production in U.S. factories expanded 1.5 percent in June, according to the monthly industrial production report from the Federal Reserve Board. While this gain was only half of May’s big increase, June’s annualized growth rate is on track with the 21 percent growth over the last year and the expansion expected over the next year.

Telecom production jumped 1.9 percent to the highest level in nearly four years. Production had been largely unchanged over the previous 16 months. It is not yet clear if the June production increase signals the beginning of the expected strong recovery in network equipment following the earlier expansion of handset production in Asia.

Computer, peripheral and storage device production increased 3 percent in June, which is above average. Production growth has been accelerating for several months.

Semiconductor and components production rose 2.2 percent, about one-third slower than the trend over the last year. This hints at the possibility of too much inventory at distributors or systems assemblers. However, brief dips in production growth are just as likely as random or measurement errors. The production gain for computers and semiconductors includes both more parts and more “function’ per part.

Production at non-electronic U.S. factories declined 0.4 percent in June after outsize increases in the two preceding months. Motor vehicle production fell 1.4 percent but the expected trend in 2004 is still no change. However end markets continue to grow quickly for machinery (up 0.6 percent) and aerospace (up 0.8 percent).

Overall, the three-month average of U.S. factory production continues to expand at a 6 percent annual pace, consistent with the expected 4 percent growth in GDP over the next year.

By: DocMemory
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