Industrial Output Rises in April : Economy: It’s the third straight monthly gain for the indicator. Analysts say it helps put on hold any new cut in interest rates.
Industrial production rose for the third consecutive month in April, the Federal Reserve Board said Friday, as a slowly building recovery persuaded companies to start restocking their shelves.
The Fed report showed April’s 0.5% growth in industrial production was widespread and led by a sharp rise in auto production.
The last time industrial production rose three straight months was in mid-1991, when it rose in May, June and July before faltering late in the year.
Most analysts said Friday’s report, together with a big jump in the money supply after two weeks of decline, almost certainly will put on hold any further interest rate cuts by the Fed.
Earlier in the week, many had expected a rate cut after reports of mild inflation.
“It provides some further evidence that the economic recovery is now becoming established,” economist Norman Robertson of Pittsburgh’s Mellon Bank said of the April industrial output report.
Even without the motor vehicle component, output was up 0.3%. Gordon Richards, an economist with the National Assn. of Manufacturers, said that “suggests that the recovery is sustainable, although the pace should be moderate.”
The Fed also revised upward, to 0.4%, its initial estimate of production in March. That was twice the 0.2% gain first reported. The April increase matched the growth in February.
Production in April was 2.5% above that of April, 1991.
The Federal Open Market Committee, the central bank’s monetary policy panel, meets Tuesday. Before the latest reports, some analysts had predicted that it would ease credit further to make sure the economy did not stumble again as it did in 1991.
Home loan rates continued to decline this week, the Federal Home Loan Mortgage Corp. said. It reported that 30-year, fixed-rate mortgages averaged 8.64% this week, down from 8.75% last week and the lowest since the 8.56% in the week ending Jan. 23.
After the Persian Gulf War early last year, industrial production rose through the summer before leveling off last fall and then dropping through January.
Output has increased since then.
“If there is a down side to the robust industrial production figures, it is that the strength of the recovery, combined with the big jump in (the money supply), will probably convince the Fed not to cut rates next week,” said John M. Albertine, head of a Washington economic forecasting firm.
Production at manufacturing plants making both durable and non-durable goods rose 0.5% in April for the third straight advance.
Output of goods expected to last at least three years, including autos, appliances and industrial equipment, was up 0.8%. Production of non-durable goods, such as textiles and chemicals, increased 0.3%.
Mining output rose 0.7%, but utility production dropped 0.2%.
The Fed said its industrial production index in April stood at 108.2% of its 1987 base, up from 107.6% in March.
The report also showed that capacity utilization--the operating rate of the nation’s factories, mines and utilities--rose 0.3% to 78.7%.
The operating rate at factories was 77.7%, up from 77.5% a month earlier. The rate at mines rose to 85.8% from 85.1%. At utilities, it slipped to 83.8% from 84%.
Industrial Production
Seasonally adjusted index, 1987 = 100
April, ‘92: 108.2
March, ‘92: 107.6
April, ‘91: 105.5
Source: Federal Reserve Board
Capacity Utilization
Seasonally adjusted percent of total capacity
April, ‘92: 78.7%
March, ‘92: 78.4%
April, ‘91: 78.6%
Source: Federal Reserve Board
