woman assembler at US manufacturing factory Copyright Bill Pugliano, Getty Images

US Factory Production Shows Broad-Based Gain Outside Autos

The results bolster the view that the industry, along with consumer spending, will contribute to a projected second-quarter rebound in economic growth.

U.S. factory production regained its footing in April to push capacity utilization to the highest since 2015, indicating the industry will support economic growth this quarter, Federal Reserve data showed Wednesday.

Highlights of Industrial Production (April)

  • Factory output rose 0.5% month over month (matching estimate) after being unchanged in March (revised from up 0.1%).
  • Total industrial production, which also includes mining and utilities, increased 0.7% month over month (est. 0.6% rise) after an upwardly revised 0.7% gain; Jan., Feb. figures revised down.
  • Capacity utilization, measuring the amount of a plant that is in use, rose to 78% (est. 78.4%) from downwardly revised 77.6% (prev. 78%)

Key Takeaways

The gain in factory output was broad-based outside of a decline in motor vehicles and parts. Several categories posted increases of more than 1%, including machinery; computer and electronic products; electrical equipment and appliances; and aerospace and miscellaneous transportation.

The factory-use rate rose to 75.8% -- the highest since August 2015 -- from 75.5% a month earlier. Even so, that’s still 2.5 percentage points below its long-run average.

The results bolster the view that the industry, along with consumer spending, will contribute to a projected second-quarter rebound in economic growth. Tax cuts and steady overseas sales are expected to underpin gains in business investment. At the same time, rising prices for materials and tariffs on imported metals, along with U.S.-China trade tensions, pose risks for American manufacturers.

Automobile and parts production decreased 1.3% after two months of strong gains, the Fed’s report said. That’s consistent with government figures based on industry reports and released earlier, which showed motor-vehicle sales cooled in April.

Revisions to data had the effect of paring gains in factory production in the first three months of the year. Manufacturing output rose at an annual rate of 1.4% in the quarter, down from a previously reported 3.1%. That followed a 5.2% gain in the fourth quarter of 2017, which was the best since early 2012.

Other Details

  • Utility output rose 1.9% after surging 6.1% the prior month.
  • Excluding autos and parts, manufacturing output rose 0.6% after falling 0.2%.
  • Mining production advanced 1.1%; with oil and gas well drilling rising 3%.
  • Production of consumer goods rose 0.9%, and output of business equipment expanded 1.2%, the most in a year.
  • Machinery production increased 2.3%.

The Fed’s monthly data are volatile and often get revised; manufacturing, which makes up three-fourths of total industrial production, accounts for about 12% of the U.S. economy

By Shobhana Chandra

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