US industrial production rises by most in over a year

[WASHINGTON] US industrial production rose in April by the most in over a year, pointing to nascent momentum in the sector.

The 0.7 per cent increase in output at factories, mines and utilities followed a revised 0.3 per cent drop in March, Federal Reserve data out on Friday (May 15) showed. That topped all estimates in a Bloomberg survey of economists.

Manufacturing output, which accounts for about three-fourths of total industrial production, climbed 0.6 per cent. Mining output, which includes energy extraction, edged lower, while utilities output rebounded.

The report adds to evidence that the manufacturing sector is holding up even as the Iran war and tariffs drive up input costs, thanks in part to tax cuts and the tailwind from the data centre boom. Still, some of the strength may reflect stockpiling in an attempt to get ahead of additional price increases.

With a fragile truce in place and the Strait of Hormuz still effectively closed, manufacturers may face even higher costs for key items like fuel and other materials in the months to come. Even if the Strait reopens soon, economists anticipate inflation is likely to persist as oil output normalises and shipping flows recover.

By industry, manufacturing output was led by an increase in motor vehicle and parts, which rose 3.7 per cent. Computers and electronic products, aerospace and nonmetallic mineral products also recorded solid gains.

Output in other categories exposed to the data centre build-out, including electrical equipment and fabricated metals, also rose.

Production of defence and space equipment advanced for a fifth straight month. Economists expect military spending to help support growth this year as the government replenishes ammunition and other equipment drawn down in the war.

Oil and gas well drilling fell for a second month. The Energy Information Administration said this week it expects US crude production will jump to a record 14.1 million barrels a day in 2027 as some domestic producers begin to ramp up output in response to higher oil prices, though it expects output to remain steady this year at around 13.6 million barrels a day.

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Capacity utilisation at factories rose to 75.8 per cent, the highest since September. The overall industrial utilisation rate also increased. BLOOMBERG