U.S. economy looks resilient as industry surges

“Economic growth is through the roof in the second quarter. There are a lot of dollars going through cash registers out there.”

Washington — Americans spent more money at retailers and factories revved up production in June, offering encouraging signs of the U.S. economy’s resilience in the face of global headwinds.

Industrial production shot up 0.6 percent, fueled by a big rebound in auto output. It was the best showing since last August. Meanwhile, retail sales also rose 0.6 percent last month, three times the gain in May, with demand strong in a number of areas.

Inflation pressures remained modest, with consumer prices climbing 0.2 percent in June. Prices are up just 1 percent from a year ago, still well below the Federal Reserve’s 2 percent target.

The new reports Friday came a week after the government’s blockbuster jobs report, which showed the economy created 287,000 jobs in June. It marked a major bounce back after a dismal gain of just 11,000 jobs the previous month. May’s result, coupled with a lackluster showing in April, had raised worries that the U.S. jobs machine was starting to sputter.

Analysts said the strong job growth in June and solid consumer spending should provide good momentum for the economy heading into the second half of the year.

The economy grew at an anemic 1.1 percent rate in the first quarter, as measured by the gross domestic product, held back by a slowdown in consumer spending and troubles in manufacturing. Analysts are hopeful that GDP growth strengthened to 2 percent or better in the second quarter, and many are looking for further acceleration in the current quarter.

“It is beyond doubt that consumers have shaken off their winter blues,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight. “Despite rising gasoline prices, consumers are opening their wallets.” Christopher said that consumer spending and housing would help bolster growth going forward.

Chris Rupkey, chief financial economist at MUFG Union Bank, said he believed GDP would be closer to 3 percent in the spring quarter, led by a surge in consumer spending.

“Economic growth is through the roof in the second quarter,” Rupkey said. “There are a lot of dollars going through cash registers out there.”

Analysts also were encouraged by the latest improvement in industrial production, which followed a 0.3 percent decline in May. The key manufacturing sector showed a 0.4 percent increase, which reflected a jump in autos and auto parts. Utility output expanded 2.4 percent, stemming from higher electricity production as warmer weather boosted demand for air conditioning.

Even the country’s beleaguered energy sector recorded gains. Mining, which covers oil production, inched up 0.2 percent. It was the second small monthly increase after eight straight monthly declines as this sector struggled with a plunge in oil prices.

Manufacturing overall has struggled for more than a year amid weakness in global markets and a strong dollar, which also has hurt exports by making American products more expensive overseas.

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST AT MUFG UNION BANK