U.S. industrial production rose 0.5% in March

April 18, 2017 –  U.S. industrial production rose in March as the weather cooled and demand for home heating surged, masking a drop in manufacturing activity during the month.

Industrial production—a measure of output at factories, mines and utilities—climbed 0.5% from a month earlier, the Federal Reserve said Tuesday. Economists surveyed by The Wall Street Journal had expected the index to climb 0.5%. Output for February gained 0.1%.

Capacity use, a measure of slack in the economy, increased 0.4 percentage point to 76.1%. Economists had expected 76.2%. Capacity use remains below the long-run average of 79.9%, a sign the economy is operating below its potential.

Overall industrial production was boosted by an 8.6% jump in output at utilities, the largest rise in the index’s history, “as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February,” the Fed said.

Elsewhere, the report was mixed.

Manufacturing output, the biggest component of industrial production, decreased 0.4% in March, the first decline since August 2016, while gains for January and February were revised down. Motor vehicles and parts were the biggest drag last month.

U.S. factory activity was stagnant through much of 2016 but picked up a little early this year. March manufacturing output was up 0.8% from the same month a year earlier. Factory output increased at an annual rate of 2.7% in the first quarter, the Fed said.

U.S. businesses have been anticipating stronger demand from domestic consumers. Overseas, economic activity also has brightened, though a stronger dollar could make American goods more expensive for buyers outside the U.S.

The Institute for Supply Management earlier this month said its index of factory activity fell to 57.2 in March from 57.7 in February, which had been the strongest reading since August 2014. Despite the downshift, the gauge marked a seventh consecutive month of industrial growth—a reading above 50 indicates sector expansion.

Tuesday’s report showed output in the volatile mining sector rose 0.1% in March. The mining index, which includes oil and natural gas extraction, was up 2.9% from a year earlier. The sector had been weighed down by weak commodity prices but appears to have stabilized.

Utility output surged 8.6% from the prior month and was up 4.6% from a year earlier. Utilities had been a drag on overall industrial production earlier in the year as warm weather capped demand for home heating.

Source: The Wall Street Journal