BUSINESS

US factory output increased 0.6 per cent in April, led by big increase in auto production

05/16/2012 10:34 EDT | Updated 07/16/2012 05:12 EDT
WASHINGTON - U.S. factory output increased in April, helped by a gain in auto production. Busier factories have driven stronger hiring this year and helped the economy grow.

The Federal Reserve said Wednesday that factory production rose 0.6 per cent in April, erasing a 0.5 per cent decline in March.

Half of the April increase reflected a 3.9 per cent jump in the production of motor vehicles and parts. That's the fifth consecutive gain at auto plants and the biggest rise since January.

Overall industrial production increased 1.1 per cent in April. In addition to the big gain at factories, output at mines and utilities both showed strong gains.

Factory output has risen 18.3 per cent since it hit a low in June 2009, the month the recession ended. Through the first three months of the year, it was growing at an annual rate of nearly 10 per cent.

Paul Ashworth, an economist at Capital Economics, said the report is a good sign that "the U.S. economy, for now at least, is shrugging off the euro-zone crisis and the slowdown in China."

The 1.1 per cent rise in overall industrial production was the largest one-month gain since December 2010. However, analysts said much of the increase reflected a 4.5 per cent jump in utility production, which was influenced by mild weather earlier this year. The warmer winter had lowered March utility output. Heating demands returned to more normal levels in April, driving utility output higher.

The manufacturing gains were broad-based. In addition to increases in auto output, production rose at a wide range of companies, from makers of computers and electronics to aerospace and furniture factories.

Other data suggest factory output is strengthening.

The Institute for Supply Management, a trade group of purchasing managers, said manufacturing activity grew in April at the fastest pace in 10 months. New orders, production and a measure of hiring all rose.

And the Federal Reserve Bank of New York said manufacturing activity in that state jumped in May, reversing a large drop in April. Measures of new orders and employment rose.

Faster output at U.S. factories has been a key reason employers have added 1 million jobs in the past five months.

Manufacturing companies have added 167,000 jobs in that stretch. That's roughly 17 per cent of the job gains, even though manufacturing represents less than 10 per cent of the economy.

Factories are cranking out more goods because consumers are more confident in the economy and spending more.

Consumer spending grew at an annual rate of 2.9 per cent in the first three months of the year, the fastest pace since late 2010. However, some of that strength was aided by a mild winter, which boosted sales in February and March.

In April, retail sales grew by just 0.1 per cent. But sales of autos, furniture, electronics and appliances rose. All are big-ticket items made in factories that help drive growth.

The economy grew at an annual rate of 2.2 per cent in the January-March quarter. That's slower than the 3 per cent growth in the October-December quarter, but better than the 1.7 per cent growth for all of last year.