Industrial production set another record in April, defying recession concerns in equity and fixed-income markets. The Federal Reserve’s index for industrial production volume rose by 0.8%, the fourth consecutive month of strong expansion, the report showed.
All major industries posted gains, a sign of continuing improvement in the domestic supply of industrial products.
Utilities led the increases, rising by 2.4% on the month, while mining and manufacturing rose by 1.6% and by 0.8%, respectively.
Production of business equipment—a proxy for private investment demand—grew significantly for the third straight month. April’s data registered a 1.1% increase, following a 1.4% gain in March and a 1.9% gain in February.
The effect of global supply chain bottlenecks and geopolitical tensions stood out as gains were driven largely by energy components, up by 1.8% on aggregate. Those components include energy goods, oil and gas dwelling, fuels and primary energy.
The lockdown in China has caused a substantial slowdown in auto production, leaving more room for growth in U.S. automobile production, which was up by 3.9% on the month.
Capacity utilization, which feeds into our RSM US Supply Chain Index, continued to improve to 79% in April from 78.2% previously. The operating rate for manufacturing rose by 0.6 percentage points to 79.2%, the highest since 2007 and above the long-run average by 1.1 percentage points. The operating rates for mining and utilities were also above their long-run averages in April.
While overall demand is slowing down, the shortage of global industrial supplies because of trade constraints is giving domestic producers more opportunities to increase production. With energy prices spiking again in May, we expect energy production to grow further.