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05-16-2017, 12:13 PM #1
U.S. Industrial Production Surged in April
U.S. Industrial Production Surged in April
Measure of output at factories, mines and utilities marks largest gain in more than three years
By Jeffrey Sparshott
Updated May 16, 2017 11:30 a.m. ET
WASHINGTON—U.S. industrial output rose sharply in April, a sign of underlying strength in the economy.
Industrial production—a measure of output at factories, mines and utilities—jumped 1.0% from a month earlier, the Federal Reserve said Tuesday. That was the largest gain in more than three years.
Manufacturing output, the biggest component of industrial production, also posted its strongest gain in more than three years, pushing that segment of the index to a new postrecession high. The index climbed 1.0% in April. Manufacturing output was up 1.7% from the same month a year earlier.
“The manufacturing sector has been on a solid run lately, with gains in almost every reported month beginning last September,” Daniel Silver, an economist at J.P. Morgan Chase, said in a note to clients.
U.S. factory activity was stagnant through much of 2016 but picked up early this year amid steady job creation, a stable dollar, stronger demand from overseas and soaring optimism following the election of President Donald Trump.
In April, the auto industry helped drive the manufacturing sector, a gain that may not be sustainable amid plateauing sales.
“One lesson from the ups and downs of the manufacturing recovery in this cycle is to curb your enthusiasm when the data finally indicate firming in activity,” said Tim Quinlan, a senior economist at Wells Fargo.
A steadier dollar and resurgent energy sector, however, may help underpin growth, even if at a slower pace, for the sector.
The Institute for Supply Management earlier this month said its closely watched index of U.S. manufacturing activity fell in April but still indicated the sector was expanding. ISM manufacturing readings for each month this year have been higher than any month in 2015 or 2016.
Tuesday’s Federal Reserve report showed output in the volatile mining sector advanced 1.2% in April. The mining index, which includes oil and natural gas extraction, was up 7.3% from a year earlier but remains well below its peak. The sector had been weighed down by weak commodity prices but appears to be rebounding.
Utility output rose 0.7% from the prior month but was down 0.5% from a year earlier. Utility use is typically more a reflection of the weather than economic vigor.
Overall capacity use, a measure of slack in the economy, increased 0.6 percentage point to 76.7%. Capacity use remains below the long-run average of 79.9%, a sign the economy is operating below its potential.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
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