Autos Drive April’s 0.9% Surge in Industrial Output
Busy auto plants pushed U.S. industrial output sharply higher in April as General Motors Corp. made up for 18 days of lost production caused by a strike in March, the Federal Reserve Board said Wednesday.
Total industrial output jumped 0.9% after falling 0.5% in March, when a strike closed virtually all GM plants across the country for nearly three weeks.
Factories ran at 83% of capacity in April, up from 82.5% in March, though slower than the 84% rate they operated at a year earlier.
Analysts said manufacturing industries clearly were gaining strength as the economy kept expanding at the start of the spring quarter, though not at a pace likely to fan inflation fears immediately.
Manufacturing vigor in April was centered in the auto industry. In fact, the Fed said that excluding the impact of the GM strike, national output was flat in April and would have risen 0.3% in March instead of falling.
“It looks like economic growth is advancing . . . with no real signs that it is booming but no real signs that it is declining,” said Sam Kahan, president of A.S.K. Financial Research Ltd. in Chicago.
The economy entered the April-June quarter with considerable momentum after expanding at a relatively strong 2.8% annual rate in the first quarter.
Analysts forecast second-quarter growth picking up to a rate as high as 3.5% to 4%, well above so-called trend growth of about 2.5% that is seen as safely noninflationary. But the expansion is expected to ease in the second half.
The Fed said production by both mining and utility companies weakened in April after gains earlier in the year.
Separately, the Commerce Department said business inventories fell in March for the first time in three months, an indication that bloated stocks of unsold goods were being whittled down so industrial production can keep growing.
“These are reports that the Fed should be well pleased with,” said Robert Dederick, economic consultant to Northern Trust Co. in Chicago. “They suggest that the negative impacts of the inventory correction have largely played themselves out and that we are moving ahead at a moderate rate.”
The Fed’s policy-setting Federal Open Market Committee meets Tuesday to consider whether interest rates need to be changed in order to foster growth.
Dederick said the Fed is likely to hold rates steady at next week’s meeting but added that the focus of the central bank’s policy deliberations is shifting.
“Their concern about under-heating [of the economy] is going to be replaced by concern about overheating down the road,” he predicted.
The Fed cut short-term interest rates three times since mid-1995 as the economy slowed at the end of last year. Many analysts think revived growth this year raises chances the Fed’s next move might be a tightening later in the year.
The Fed said production of automotive products jumped 12.5% in April after falling 10% in March. New cars were churned out at an annual rate of 6.3 million a year, compared with 4.7 million in March, while assemblies of light trucks increased to 5.6 million from 5 million.
Other manufacturing businesses recorded stronger output, though not at the pace seen in the auto industry.
The Fed said production of computers and office equipment increased 2.4% in April after larger gains in February and March.
Total manufacturing output was up a sturdy 1.3% in April following a 0.8% plunge in March, but the Fed said that excluding motor vehicles and parts, production at manufacturing companies was up only 0.3% in April and 0.1% in March.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Industrial Production
Seasonally adjusted index, 1987=100
April 1996: 124.5
Source: Federal Reserve Board
