Supply Chain

Industrial Production Rises On Higher Utility Demand

Demand for electricity and natural gas returned to a more normal level, and manufacturing output rose 0.3%.
Katie Kuehner-HebertMay 17, 2016

Higher demand for electricity and natural gas drove an increase in industrial production in April, though factory output grew more modestly, according to the Federal Reserve.

Industrial production rose 0.7% in April after decreasing in the previous two months, the Fed said Tuesday. Fueling the rise was a 5.8% jump in the index for utilities, as the demand for electricity and natural gas returned to a more normal level after being suppressed by warmer-than-usual weather in March.

However, manufacturing output rose just 0.3% after declining the same amount in March. Mining production fell 2.3% and has decreased more than 1.5% per month, on average, over the past eight months.

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At 104.1% of its 2012 average, total industrial production in April was 1.1% below its year-earlier level.

The Fed’s report suggests that underlying economic growth is still subdued nearly seven years after emerging from recession, according to The Wall Street Journal. Since last summer, overall output had fallen broadly, due in large part to weak demand for products and the strong dollar driving up U.S. export prices in foreign markets.

TD Securities economist Millan Mulraine called the overall report “encouraging” but said the economy looked far from robust, according to the WSJ, with “gains in utility production likely to be unsustainable and the rebound in the manufacturing sector looking vulnerable.”

The economy grew at just a 0.5% annual rate in the first quarter. Many private-sector forecasts expect growth to rebound to between 2% and 2.5%, annualized, in the current quarter. The Atlanta Federal Reserve estimates growth of 2.8%.