Industrial production moved higher by 1.0% in April from its March reading and 2.2% versus the previous year according to a release by the United States Federal Reserve. Industrial production is a measure of output from manufacturers, mines, and utilities. Although the activity measured is narrow, the reading often correlates with broader forces in the economy and is seen as one sign of the health of the corporate sector.
Industrial production had been falling since 2014 until this February but has now recorded three consecutive monthly increases. A stronger dollar and weak commodity prices weighed on the index during the recent past.
Capacity utilization, released by the Fed concurrent to industrial production, ticked higher in April to 76.7% from 76.1% in March. Capacity utilization measures how much of the productive capacity of the country is being put to use. Low readings signal cyclical downturns while high readings can presage higher inflation as factory owners need to commit to expanding capacity before being able to meet demand. That measure has still not breached its pre-recession level of more than 80%.
April’s reading on industrial production comes amidst other data showing an accelerating growth rate in the United States, albeit not growth quick enough for the country to break out of its 2% funk. Industrial production is one of four coincident economic indicators that are generally gauged to track the current strength of the economy, along with real personal income, employment, and real retail sales. So far in 2017, the composite year-over-year increase in those indicators has been 1.9% versus 1.2% last year. GDP growth is also expected to increase to 2.1% this year versus 1.6% last year.
It has now been nearly ten years since the ‘Great Recession’ officially began in the United States. Since the time, industrial production has recovered to about identical levels as in December 2007, while personal income, employment, and retail sales are all higher by between 5% and 15%.
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