Economic Report: Industrial production climbs 0.7% in April for third straight month of gains

By

Senior economics reporter

Rising oil prices are expected to lead to more U.S. energy production in coming months.

The numbers: Industrial production rose 0.7% in April, the Federal Reserve said Wednesday. The gain was slightly above Wall Street expectations of a 0.6% increase. There was a mix of revisions to the prior two months that were downward on net. Still, output rose at a 2.3% rate in the first quarter.

Capacity utilization rose to 78% in April, a three-year high.

What happened: Manufacturing output rose 0.5% in April after a flat reading in March. Motor vehicle output fell 1.3%.

Mining output, which includes oil and gas production, rose 1.1% while utility output was up 1.9%. In April, the rise in industrial production was supported by increases in every major market group.

Big picture: American factories, mines and oil wells are hopping, economists said. While there is some concern about signs the global economic upswing seen since the fourth quarter may have peaked, the outlook for the U.S. manufacturing sector is still bright, in part because rising oil prices will lead to more U.S. production.

What are they saying?: “Industrial production was up a healthy 3.5% year-on-year in April and we look for it to build further momentum over the course of 2018. A positive backdrop that includes firm domestic and external demand, tax cuts and a less restrictive regulatory, higher energy prices and a still weak US dollar are expected to underpin average annual industrial production growth of 4.2% in 2018, much stronger than the 1.6% gain recorded last year,” said Gregory Daco, chief U.S. economist at Oxford Economics.

Market reaction: Not much immediate movement after the report was released. The Dow Jones Industrial Average DJIA, -0.05%   was staging a tentative rebound despite focus on new difficulties in planning an upcoming summit between the U.S. and North Korea.

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