Industrial Output Surges 0.7%, Hits 6-Month High

U.S. industrial production surged 0.7% in April at the fastest pace in six months, with output of cars, business equipment and appliances especially strong, the Federal Reserve Board said Monday.

The Fed said the April advance, more than three times as rapid as the 0.2% March increase, pushed overall industrial output 6.4% higher than a year ago.

Much of the strength in the past year has been credited to booming export demand as American producers have benefited from the weaker dollar, which makes their goods more competitive on overseas markets.

“For a part of the economy that was in so much trouble just a little over a year ago, the turnaround in manufacturing has been amazing,” said Allen Sinai, chief economist of the Boston Co.

The April increase reflected widespread output gains at manufacturing plants, where production rose 0.7%. Factories producing durable goods, items expected to last three or more years, saw output climb 0.9% while plants making non-durable goods boosted output by 0.4%.

There was a 0.9% rise in production of business equipment, a category including everything from heavy machinery to computers. Strong gains have been registered in this sector all year as manufacturers have increased spending to expand their production facilities to meet the rising export demand.

Forecasting Growth

After adjusting for inflation, business investment shot up at an annual rate of 21% in the first three months of the year, the biggest increase in more than four years.

Cynthia Latta, an economist with Data Resources Inc., said this pace of investment spending was not sustainable and she predicted slower growth in the months ahead.

She said this was part of the reason that Data Resources was forecasting that overall economic growth, as measured by the gross national product, would not be as strong in the current quarter as the 2.3% advance from January through March. She predicted that the GNP would rise at a rate of just 1.5% from April through June.

Auto production, which had been lagging as manufacturers tried to work down a huge backlog of unsold cars, jumped sharply for a second straight month with passenger cars being assembled at an annual rate of 7 million units, up from a rate of 6.6 million in March and 6.1 million in February.

Gordon Richards, an economist with the National Assn. of Manufacturers, said the two increases reflected the auto makers’ success in reducing high inventories through aggressive sales incentive programs. But he said it was possible that supplies would again exceed demand later in the year, triggering another round of production cutbacks.

Utilities Down

The overall increase in April was the strongest since a 1.1% rise last October. Output slowed a bit early in the year, reflecting in large part the drop in auto production.

Still, the slowdown was not anywhere near as severe as some economists had forecast immediately following the October stock market crash, which had raised concerns that sharp production cutbacks in the early part of this year would push the country into a recession.

Output in the mining industry, which includes oil and gas drilling, jumped 1.3% in April, following a 0.7% March increase. The strong gains in both of those months followed a string of declines in this sector, which has been depressed because of past declines in energy prices.

Output at the nation’s utilities fell 0.8% in April, following an even larger 1.1% drop in March.

The various changes left the industrial production index at 135.6 in April, up from 134.7 in March.