U.S. industrial production rises 0.5 pct in July

WASHINGTON (Reuters) - U.S. industrial production rose more than expected in July, Federal Reserve data showed on Friday, supporting hopes the longest recession since the 1930s was finally drawing to a close.

Aside from a hurricane-related rebound in October 2008, this was the first monthly increase since December 2007, which marked the start of the current recession.

Industrial production rose 0.5 percent, stronger than the 0.3 percent that economists polled by Reuters had expected and well above June's 0.4 percent decline.

Manufacturing output rose 1 percent in July, mostly because of a jump in motor vehicle assemblies which rose to an annual rate of 5.9 million units in July from 4.1 million in June.

Auto sales got a big boost from the government's "cash for clunkers" program, which provides incentives to buy new cars. The program's initial $1 billion funding was exhausted in its first week, and it has since been expanded to $3 billion.

Excluding motor vehicles and parts, industrial output fell 0.1 percent in July.

The capacity utilization rate, a measure of slack in the economy, edged up to 68.5 percent, slightly higher than economists had expected but still 12.4 percentage points below the 1972-to-2008 average.

The output of utilities fell 2.4 percent, reflecting unseasonably mild temperatures in July, while mining output rose 0.8 percent.

(Reporting by Emily Kaiser; Editing by Neil Stempleman)