WASHINGTON, April 14: US industrial production rose 0.6 per cent in March as mining and utility output became less volatile, while capacity use reached its highest point in 5-1/2 years, the Federal Reserve said on Friday.
The Fed said March utility output rose 0.5 per cent after a large jump in February due to cold temperatures followed a big decline in January driven by warm weather.
Output from the nation’s mines rose 0.9 per cent after falling 0.7 per cent in February, as oil and gas facilities continued their recovery from hurricanes last year, while coal output surged.
Manufacturing output rose 0.5 per cent, driven by strong gains in motor vehicles and electronics.
“The 0.6 per cent increase in industrial production and 0.5 per cent gain in manufacturing production in March shows that the strong industrial rebound that began last fall has momentum,” said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI.
Capacity utilization, a measure of how close to full potential factories, mines and utilities are running, rose to 81.3 per cent from a downwardly revised 81.0 in February, marking its highest level since reaching 81.5 per cent in September 2000.
Wall Street analysts polled by Reuters had expected overall March industrial production to rise 0.5 per cent and capacity use to reach 81.4 per cent.
The strong numbers are likely to reinforce views among some Federal Reserve policy-makers that tightening labour markets and rising capacity use could create inflationary pressure. Fed governor Donald Kohn said on Thursday the central bank is examining economic data in a “meeting by meeting” approach on whether to continue its rate tightening campaign.
“This report does not add to the case that there’s a visible slowing in the economy. It keeps (the Fed) directly on path to tighten in May and leaves the debate on whether they will tighten in June certain to be a very lively one,” said Dana Johnson, chief economist at Comerica Bank in Detroit.
“The Fed needs more evidence than they have on hand” to take a more neutral view of interest rates, he said, adding that he believes the slowing housing sector and higher energy prices will cool US economic growth this year.
US financial markets were closed on Friday for the Good Friday holiday.
All major sectors contributed to the March increase in production, with the largest gains in materials and business equipment.—Reuters
