The Economy

U.S. Industrial Output Rises 0.7% in April

"The outlook for the U.S. manufacturing sector is still bright, in part because rising oil prices will lead to more U.S. production."
Matthew HellerMay 16, 2018

U.S. industrial production rose slightly faster than expected in April, a third straight monthly increase that was supported by gains in every major market group.

The Federal Reserve said Wednesday that output expanded 0.7% last month, just topping Wall Street expectations of a 0.6% increase. Despite downward revisions of output in three of the previous four months, production rose at a 2.3% rate in the first quarter.

Capacity utilization rose to 78% in April, a three-year high.

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“While there is some concern about signs the global economic upswing seen since the fourth quarter may have peaked, the outlook for the U.S. manufacturing sector is still bright, in part because rising oil prices will lead to more U.S. production,” MarketWatch said.

Manufacturing output rose 0.5% in April after a flat reading in March, with a 2.3% increase in machinery production offsetting a drop in production of primary metals and fabricated metal products.

Motor vehicle output fell 1.3% but mining output, which includes oil and gas production, rose 1.1% and utility output was up 1.9%.

The Fed’s production report follows a survey of factory managers that showed a slowdown in U.S. factory activity, with manufacturers complaining about rising commodity prices in the wake of the Trump administration’s tariffs on steel and aluminum imports.

Fed Chairman Jerome Powell said last month it was too early to know how the tariffs would affect the U.S. economic outlook.

Gregory Daco, chief U.S. economist at Oxford Economics, expects output to build further momentum over the course of the year.

“A positive backdrop that includes firm domestic and external demand, tax cuts and a less restrictive regulatory, higher energy prices and a still weak U.S. dollar are expected to underpin average annual industrial production growth of 4.2% in 2018, much stronger than the 1.6% gain recorded last year,” he said.