Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a US economic recovery that is showing signs of moderating in the second half of the year. Output climbed 1 per cent as factories churned out more computers, appliances, automobiles and industrial machinery, the Federal Reserve said today in Washington. Another report showed work began last month on fewer houses than forecast. Increased business investment is propelling the gains in manufacturing, which accounts for 11 per cent of the world's largest economy. At the same time, a slowdown in consumer spending will reduce the need to rebuild inventories, while cooling growth overseas may limit exports, meaning the pace of expansion will probably slacken. Advertisement: Story continues below "This is encouraging," said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, who correctly forecast the jump in output. "This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly." Exceeds Forecast The median forecast of 74 economists surveyed by Bloomberg News called for a 0.5 per cent gain in industrial production. Estimates ranged from no change to an increase of 1.2 per cent. Output fell 0.1 per cent in June, revised from a previously reported 0.1 per cent increase. Factory output, which makes up 75 per cent of all production, rose 1.1 per cent last month after falling 0.5 per cent in June. Utility output increased 0.1 per cent after a 2.3 per cent jump the prior month. Mining production, which includes oil drilling, rose 0.9 per cent. Manufacturing got a boost from auto making as fewer factories shut for mid-year retooling. Output of motor vehicles and parts surged 9.9 per cent in July after falling 2.5 per cent a month earlier. Rosetta Stone Portuguese Excluding autos and parts, manufacturing still increased 0.6 per cent after declining 0.3 per cent. "We're seeing decent growth in manufacturing but anticipate that the pace will gradually slow down as we move forward," said Kevin Logan, chief US economist at HSBC Securities USA Inc. in New York. "We'll continue to have positive economic growth. It'll be a modest recovery." 'Unusual Uncertainty' Cisco Systems Inc., the world's largest maker of networking equipment, last week forecast first-quarter sales that missed analysts' estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing "unusual uncertainty" and getting "mixed signals" about the health of the economy. Housing is among areas showing scant signs of rebounding. Work began on 546,000 houses at an annual rate last month, fewer than the 560,000 median estimate of economists surveyed by Bloomberg News and up 1.7 per cent from June, Commerce Department figures showed today in Washington. Building permits dropped 3.1 per cent to a 565,000 pace. Builders are struggling to drum up demand following the end of a government tax break, for which buyers had to sign purchase agreements by April 30 in order to qualify for up to $8,000, even as mortgage rates drop to record lows. No Rebound "The tax credit brought forward some demand, and now we're in the middle of the payback," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who forecast a 545,000 pace for starts. "We're in a deep hole right now.


