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By James Haughey -- Electronic News, 8/18/2005

U.S. electronics factories boosted production 2.6 percent in July versus June, about double the month-to-month increase in the previous three months.

Large additions to production schedules for semiconductors, components and telcom equipment fueled the strong July gain. Telcom production rose 3.1 percent after a 0.1 percent dip in June. However, this market is so volatile from month to month that the best interpretation of the July increase is that telcom production remains on a 15 percent to 18 percent annual growth trend.

Semiconductor and component production also gained 3.1 percent last month following three months of 1 percent monthly increases. This July increase likely signals the beginning of a stronger period for these parts because it is consistent with earlier reports of improving orders from key end markets and reduced inventories at component manufacturers.

The production of computers and peripherals increased 0.8 percent, only slightly below recent monthly gains.

Production was unchanged at all other U.S. manufacturing plants in July. Monthly production gains have varied in the past year from -0.3 percent to +0.4 percent, depending on auto and truck assembly schedules; production at all non-electronic factories is up 2.1 percent from a year ago. A reversal of the large 3.9 percent cut in July motor vehicle production in August or September is certain now that deep price discounting has driven auto dealer inventories well below normal.

James Haughey is director of economics at Reed Business Information, the parent company of Electronic News.