Industrial production up in July

But he said manufacturers remain "deeply concerned about the 'fiscal cliff,' the recession in Europe and the impact of the upcoming election."

He said other surveys are reflecting those concerns, with the New York Federal Reserve Bank's Empire State Manufacturing Survey showing that overall business conditions weakened in August. 

Manufacturing has led the economic recovery, but a recent separate report from the Institute for Supply Management showed that the sector contracted in June for the first time in three years.

Still, economists say the lull in manufacturing activity could be temporary and should strengthen through the rest of the year. 

Capacity utilization rose to 79.3 percent from 78.9.

Factories have increased production by 21.9 percent since hitting a low more than three years ago, in June 2009. That level is only 1.7 percent below the April 2007 high, hit before the recession began in December that year. 

Mining output, including oil and gas production and coal mining, was up 1.2 percent in July, while utility activities increased 1.3 percent as the majority of the country experienced a record heat wave last month.