Industrial Production Increases 0.8%

Manufacturing output rose 1%

After having risen 0.2% in March, industrial production increased 0.8% in April, the Federal Reserve reported on May 14.

Manufacturing output climbed 1% in April for a second consecutive month and was 6% above its year-earlier level. The increases in manufacturing continued to be broadly based across industries.

Outside of manufacturing, the output of mines rose 1.4%, and the output of utilities decreased 1.3%. At 102.3% of its 2002 average, total industrial output in April was 5.2% above its year-earlier level.

The capacity utilization rate for total industry advanced 0.6 percentage point to 73.7%, a rate 6.9 percentage points below its average from 1972 to 2009, but 4.5 percentage points above the rate from a year earlier.

"As indicated by the purchasing managers' report two weeks ago, manufacturing activity is growing very rapidly," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "The industrial sector is benefiting from increased domestic demand, a strong export expansion, and to an important extent from a cyclical inventory swing. The current supply chain is exceptionally lean as firms very cautiously expand production in response to the sudden pick up in orders. Inventories, nevertheless, have increased only modestly because materials are consumed in expanding production and supply availability has limited the ability to increase stocks.

"Many industries are struggling to ramp up production fast enough, he added. The widespread manufacturing rebound is evident from the fact that 17 of the 20 major manufacturing industry groups grew in April and one industry was flat. Just as inventory destocking made the recession worse in manufacturing, the inventory swing has pushed manufacturing growth well above the pace of overall economy. We expect to see continued moderately strong growth in manufacturing activity this year as the industrial sector restocks and benefits from the economic recovery."

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