Daily Management Review

More Than Expected Surge In US Manufacturing Output In April


More Than Expected Surge In US Manufacturing Output In April
There was a more than predicted expansion of factory output in the United States in April driven by the ongoing high demand for automobiles and other items, which should support manufacturing activity.
The Federal Reserve said on Tuesday that manufacturing production grew 0.8 per cent in April after a similar increase in March. Factory output was expected to rise 0.4 per cent, according to economists polled by Reuters. When compared to April 2021, output increased by 5.8 per cent.
However, due of Russia's invasion of Ukraine and China's zero-tolerance COVID-19 policy, manufacturing, which amounts for 12 per cent of the economy, is facing new supply chain constraints.
In April, the Institute for Supply Management's national manufacturing activity indicator fell to a 1-1/2-year low.
Factory activity in New York state decreased for the third time this year in May, according to a survey released by the New York Fed on Monday.
Since the Fed began raising interest rates in March, the dollar has gained at least 2.7 per cent versus the currencies of the United States' biggest trading partners, which could hamper export demand and damage manufacturing.
After increasing by 8.3 per `cent in March, auto production grew by 3.9 percent last month. Only nonmetallic mineral items, electrical equipment, appliances and components, and furniture and related products saw losses in the durable goods sector.
The increase in manufacturing output in April was combined with a 1.6 per cent rise in mining output to boost industrial production by 1.1 per cent. This comes after a 0.9 per cent gain in March.
Higher crude oil prices, which have raised the cost of gasoline to record highs, are boosting mine production. After a 0.3 percent drop in March, utilities production increased by 2.4 per cent.
Capacity utilisation in the manufacturing sector jumped 0.6 percentage point to 79.2 per cent in April, the highest level since April 2007. Its long-run average is 1.1 percentage points higher.
The industrial sector's overall capacity utilisation increased to 79.0 per cent last month, up from 78.2 per cent in March. It is 0.5 percentage points lower than the average from 1972 to 2021.
Production at mines is being boosted by higher crude oil prices, which have driven the cost of gasoline to record highs. Utilities production rebounded 2.4% after dipping 0.3% in March.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, increased 0.6 percentage point to 79.2% in April - the highest level since April 2007. It is 1.1 percentage points above its long-run average.
Overall capacity use for the industrial sector climbed to 79.0% last month from 78.2% in March. It is 0.5 percentage points below its 1972-2021 average.
Capacity utilisation indicators are often used by Fed officials to determine how much "slack" remains in the economy, or how far expansion can go before becoming inflationary.