Industrial Production Increases 1.1% in April

Durable goods continue to lead manufacturing growth.

Industrial production increased 1.1% in April, the Federal Reserve reported on Wednesday. The central bank also said output fell 0.6% in March and moved up 0.4% in February. Previously, it estimated that industrial production had been unchanged in both months.

Manufacturing output increased 0.6% in April after having decreased 0.5% in March. Capacity utilization for manufacturing in April moved up 0.3% to 77.9%, a rate 14.1% above its recession low point in June 2009 but still 0.9% below its long-run average.

The up and down pattern in the production figures, said Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), "suggests that seasonal distortions from one of the warmest winters of the past century are still wreaking havoc with many economic data series."

Within manufacturing, the output of durable goods increased 1.3% in April after having moved down 0.3% in March. With the exception of wood products, the Federal Reserve noted, all major categories of durable goods rose. The largest gains were recorded by motor vehicles and parts, computers and electronic products, aerospace and miscellaneous transportation equipment, furniture and related products, and miscellaneous manufacturing.

"The snapback in manufacturing output was more than entirely accounted for by an impressive overall performance in durable goods, which has been the primary source of output and employment strength for U.S. manufacturing throughout the current recovery," said Waldman

The production of nondurable goods decreased 0.2% in April after having fallen 0.8% in March. The largest decrease in April was for petroleum and coal products, which dropped 2.6%t. The largest gains were posted for textile and product mills, for apparel and leather, for paper, and for printing and support.

Production at mines rose 1.6%, and the output of utilities gained 4.5% after unseasonably warm weather in the first quarter held down demand for heating, the central bank noted.

At 97.4% of its 2007 average, total industrial production for April was 5.2% above its year-earlier level.

While industrial production was up, economists warned that there were signs that the manufacturing rebound was starting to weaken. Waldman noted that primary metals, which supplies many goods-producing sectors, only gained 0.1% in April and contracted by 2.5% in March. The machinery sector had gains in March and April but lost steam last month. And the nondurables sector had a decline in output in April.

"Manufacturing output growth is slowing from the outsized gains seen during the first quarter of 2012," Waldman said. "The risks for near-term factory sector prospects are clearly on the downside. The recession and instability risks from the troubled Eurozone, weakness in much of the industrialized world, and sharply slowing growth in emerging markets are conspiring with moderating business investment in the U.S. to create headwinds for U.S. manufacturing growth."

Alan Tonelson, a research fellow with the U.S. Business and Industry Council, was more blunt in his assessment, calling for policy changes in trade and other areas to promote reindustrialization.

"Today's manufacturing data, including a downward revision for March, confirm that America's industrial comeback is petering out," he warned. "In fact, real manufacturing production this year so far is expanding only at a 2.57% pace -- well off the 6.40% and 4.25% figures for 2010 and 2011, respectively.

"Worse, manufacturing's share of GDP has only recovered to bubble era levels -- now widely recognized as far too low to support healthy economic growth."

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