America's factories, mines and utilities operated at 80.5% of capacity in July, the fastest pace in 18 months, as U.S. manufacturers continued to reap the benefits of higher export sales, the government reported Monday.
The Federal Reserve said the July operating rate was 1.3 percentage points higher than a year ago, while steel and other primary metal manufacturers were operating at the fastest pace in almost six years.
"Manufacturing is coming back. There is no doubt about it," said Tom Megan, an economist with Evans Economics in Washington.
Analysts credited the rebound to the 40% decline in the value of the dollar over the past two years, which has made U.S. products more competitive on overseas markets.
John Hagens, an economist with Wharton Econometrics of Bala Cynwyd, Pa., said that so far the turnaround has been concentrated in non-durable goods industries such as paper, textiles, plastics and chemicals.
Higher export sales in these industries have left them with exceptionally high operating rates. Paper factories were operating at 96% of capacity .
Hagens said that industries making more sophisticated products, such as machine tools, computers and telecommunications equipment, should begin to reap benefits from the dollar's turnaround.
The 80.5% operating rate in July followed a revised operating rate of 80.1% in June and marked the best performance since American industry operated at 80.9% of capacity in January, 1986.