April Industrial Production Is Flat, Says Federal Reserve

The Manufacturers Alliance/MAPI expects manufacturing production to continue to outpace GDP, but by a narrower margin, for the rest of the year.

Industrial production was unchanged in April after having increased 0.7% in March. Output in February is now estimated to have declined 0.3%; previously it was reported to have edged up 0.1%.

In April, manufacturing production fell 0.4% after rising for nine consecutive months. Total motor vehicle assemblies dropped from an annual rate of 9.0 million units in March to 7.9 million units in April, mainly because of parts shortages that resulted from the earthquake in Japan.

Excluding motor vehicles and parts, factory production rose 0.2% in April. The output of mines advanced 0.8%, while the output of utilities increased 1.7%. At 93.1% of its 2007 average, total industrial production was 5.0% above its year-earlier level.

The rate of capacity utilization for total industry edged down 0.1 percentage point to 76.9%, a rate 3.5 percentage points below its average from 1972 to 2010.

"The economic impact of the Japanese tsunami hit the United States in April," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "Motor vehicle and parts production declined 8.9 percent as the Japanese nameplate manufacturers had to shut down or scale back production for lack of parts.

"Declining auto industry production accounted for more than all of the decline in manufacturing production last month," Meckstroth said. "Even without the auto parts shortage, manufacturing production growth would have been meager because seven of the 20 major manufacturing industries declined in April"

Meckstroth sees scaled-back growth for the rest of the year.

"The manufacturing sector was on a torrid pace in the first quarter, growing at a 7 percent annual rate compared to 1.8 percent overall economic growth (GDP),"he noted. "The Manufacturers Alliance/MAPI expects manufacturing production to continue to outpace GDP, but by a narrower margin, for the rest of the year. Consumers have pent up demand for big ticket durable goods, businesses need to replace and upgrade equipment, and exports from U.S. factories are very competitive in world markets. The April decline in manufacturing production is a temporary setback that can be recouped later in the year."

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