Industrial production increased at its fastest pace in 15 years in June, up 3.8 percent on the back of a surge in transportation equipment output. Compared to June of last year, production gained 2.0 percent. Manufacturing output was 3.5 percent higher in June and 2.4 percent higher than a year ago.

Transportation goods production increased 16.6 percent in June, also the highest production pace since June of 2020, after a modest 0.3 percent gain in May. Year-on-year output was 17.3 percent higher. Within the sector, production of aircraft and spacecraft helped drive the"other transportation equipment" component to a 26.7 percent increase.

The increase was in part attributed to ramped up production after delays in the previous quarter and some loosening of supply constraints. It is also likely that production increased to some degree ahead of the imposition of tariffs. Looking at the less volatile quarter-on-quarter comparison, output of transportation goods was up a robust 6.4 percent from the first quarter.

Gains were broad-based with all the main sectors reporting gains, led by a 7.2 percent rise in capital goods output, and a 6.6 percent increase in energy output in June. Compared to a year ago, output was up 3.7 percent and down 3.3 percent for the categories.

Manufacturing of consumer durables was up 2.0 percent in June after a 0.1 percent decline in May, but 0.9 percent lower than a year ago, while consumer non-durables output rose 0.3 percent month-on-month and falling 0.4 percent year-on-year.

While it appears there were some onetime effects boosting production, it is undeniable June was a very strong result. With the contours of an EU trade agreement on tariffs with the US, there is some degree of guidance on what businesses can expect. Granted that can change on a whim, but for now the second quarter production closed on a very positive note.

Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and cause misleadingly large short-term swings in total industrial production.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios. Like the PPI and the orders data, construction is excluded from the data. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.