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Factories aid bumpy recovery

Photo by Carlos Osorio

Photo by Carlos Osorio

WASHINGTON -- New government data offered a mixed picture of the economic recovery Tuesday, as U.S. manufacturing activity grew in July at the fastest pace in nearly a year while the outlook for the housing market remained dim.

Auto plants stayed open when they normally close for summer renovations and businesses replaced worn-out equipment. That helped boost factory output 1.1 percent -- the biggest increase since August 2009.

Overall output at the nation's factories, mines and utilities rose 1.0 percent last month, the Federal Reserve reported. That followed a decline of 0.1 percent in June, the first drop in more than a year.

Construction of new homes and apartments rose 1.7 percent last month, the Commerce Department said. But the gains were driven by a 32.6 percent surge in apartment and condominium construction, a small fraction of the market.

Single-family home construction, which represented nearly 80 percent of the market, fell 4.2 percent. And requests for building permits, considered a good sign of future activity, slid 3.1 percent.

Separately, the Labor Department said wholesale prices rose last month on higher costs of food, cars and light trucks. Excluding volatile food and energy costs, so-called ''core'' producer prices rose 0.3 percent in July, the ninth straight increase. Core prices have risen 1.5 percent in the past year, a sign that inflation remains tame.

The recovery has weakened in recent months. Consumers are spending less and saving more. Businesses are hiring fewer workers. The unemployment rate for July was 9.5 percent and economists expect that to stay at that level for the rest of the year.

Investors appeared to be pleased with the latest economic data. All major stock indexes rose and the Dow Jones Industrial average jumped more than 170 points in afternoon trading.

Manufacturing has been the strongest sector since the recession ended, growing in 11 of the past 12 months.

Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, cautioned that the numbers for June and July appeared more volatile because of ''statistical quirks'' such as the unexpected auto production.

''Things are nowhere near as bad as they appeared in June and nowhere near as good as the headline number in July would indicate,'' Shapiro said. He said averaging the two months would present a more accurate picture of manufacturing.

Growing demand for new cars and trucks prompted some automakers to keep factories open in July. Traditionally, auto companies close operations in the summer and use the time to refurbish assembly lines.

General Motors, the largest U.S. automaker, opted to forgo its two-week shutdown at nine of its 11 assembly plants in order to make 56,000 additional vehicles in high demand. The facilities include GM's Hamtrack, Mich,. facility that is making the plug-in electric Chevrolet Volt that will go on sale later this year.