Industrial production increased in April, but market forces continue to bear down on the manufacturing sector, creating headwinds to future growth.
The Federal Reserve reported this week that industrial production rose 1.1% in April after falling 0.6% in March. In the manufacturing sector, output increased 0.6% during the month following a 0.5% decline in March. Capacity utilization for manufacturing moved up 0.3% during the month to 77.9%, 14.1% above its trough in June 2009, but still 0.9% below its long-run average
Durable goods output increased 1.3% in April after having moved down 0.3% in March. With the exception of wood products, all major categories of durable goods rose. The largest gains were in motor vehicles and parts, computers and electronic products, aerospace and miscellaneous transportation equipment, furniture and related products, and miscellaneous manufacturing.
The numbers reflect a seasonal distortion from one of the warmest winters in the past century and offer a glimpse into moderating manufacturing growth ahead.
“For some durable goods sectors, such as electrical equipment and aerospace, the gain in April was essentially the mirror image of the fall in March,” Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), said following the release of the report on May 16. “But other data, distorted as they may be by seasonal issues, suggest a moderation in overall manufacturing activity. …
“Manufacturing output growth is slowing from the outsized gains seen during the first quarter of 2012. 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.”