Output at Factories Jumps 0.9% in April
Industrial production at the nation’s factories, mines and utilities shot up in April, its strongest pace in 20 months and the latest testimony to the booming economy.
Economists said Monday’s report by the Federal Reserve suggests that the economy--in its longest-ever streak of uninterrupted growth--is growing at a too-rapid pace that probably can’t be sustained without sparking inflation.
Some economists said this latest snapshot of the industrial sector would justify a more aggressive half-point increase in interest rates in an effort to slow the economy and keep inflation at bay. Federal Reserve policymakers are scheduled to meet today.
“Soaring production just about cinches” a half-point increase, said economist Joel Naroff of Naroff Economic Advisors. “Clearly this economy is on the move.”
Industrial production jumped by 0.9% in April, right on target with many analysts’ expectations. It was the largest increase since August 1998, when industrial production rose 1.8%. Compared with a year ago, industrial production in April was 6.1% higher.
In March, industrial production grew by 0.7%, much stronger than the 0.3% gain the Fed previously estimated.
The March and April reports “paint the picture of an industrial sector that is gaining momentum,” First Union economist David Orr said. “It is bound to further bolster the Fed’s perception that it must become more aggressive about reining in demand.”
Since June, the central bank has boosted interest rates five times by a quarter-point each to try to slow economic growth.
Meanwhile, operating capacity climbed from 81.7% in March to 82.1% in April, faster than many analysts forecast and the strongest since May 1998, when operating capacity stood at 82.4%.
Even with the 0.4 percentage point increase, capacity was still below levels usually associated with concern about inflation.
Generally, economists say an operating capacity of 84% could indicate that factories can’t produce goods quick enough, which could lead to price increases.
Jerry Jasinowski, president of the National Assn. of Manufacturers, said growth in his sector is coming in large part from gains in worker productivity, something that bodes well for keeping inflation under control.
In April, gas and electric utilities led the growth in industrial production, boosting output by 2.8%.
Manufacturing grew by a brisk 0.8%, with most major industries in the sector posting gains, the Fed said. Mining output rose a moderate 0.4%.
Car and truck production rose from 13 million units in March to 13.3 million in April, the highest in five months.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Industrial Production
Index; 1992=100; seasonally adjusted:
*
April: 143.7
*
Source: Federal Reserve Board
