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U.S. Factory Output Surges In April

Buoyed by manufacturing gains, particularly in the automotive sector, U.S. factory output increased to a three-year high last month, according to data from the Federal Reserve. Output of motor vehicles and parts grew by 5%, while machinery output increased by 0.9%. Overall industrial production rose 1% in April, exceeding consensus forecasts and strengthening the notion that the U.S. economy rebounded in the second quarter after a slow start to 2017.

The broad-based advances also included mining output, which rose 1.2%, following a 0.4% drop in March. Utilities output rose 0.7% as well, after a sharp 8.2% increase a month earlier. Excluding autos, manufacturing was still up a solid 0.7%, the Fed said. Recent data from the Institute for Supply Management backed up the Fed-indicated trends, showing the manufacturing sector was expanding in 2017. Analysts say the manufacturing sector has benefitted from a stabilizing dollar and the likelihood that more Trump-led business-friendly policies – like tax cuts – are on the horizon.

Overall capacity use – a measure of slack in the economy – rose by 0.6% to 76.7% in April. The number is below the long-run average of 79.9%, meaning the U.S. economy likely has more room to grow. While April’s factory output continued positive signals, the Federal Reserve did slightly revise downward March’s output to a 0.4% gain versus a previously reported 0.5% rise. Still, industrial output has been up for three consecutive months.​