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U.S. Industrial Production Rose 0.7% in April -- Update

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05/16/2018 | 04:43pm CEST

By Josh Mitchell

WASHINGTON -- U.S. industries pumped out more goods in April to meet growing demand from consumers and businesses, another sign the economy is gaining momentum.

Industrial output -- reflecting everything produced by factories, mines and utilities -- rose a seasonally adjusted 0.7% in April from a month earlier, the Federal Reserve said Wednesday. That marked the third straight month of higher production. Production increased broadly across all sectors and has risen 3.5% over the past year.

Households are buying more consumer goods and companies are stepping up investment in equipment as they gain confidence in the economy. Factories, in turn, are stepping up output. Factory output rose 0.5% over the month and 1.8% over the past year.

The industrial sector is a slice of the overall economy. But the boost in output suggests the economy is strengthening. The nation's gross domestic product -- the broadest measure of goods and services produced in the U.S. -- rose at a 2.3% annual rate in the first quarter, according to a government estimate, and many economists project growth is approaching a 3% rate in the current quarter.

A separate measure suggests the industrial segment of the economy is firming but not to the extent that inflation seems about to surge. Capacity utilization -- reflecting how much industries are producing, relative to their potential output -- rose 0.4 percentage point last month to 78%, the highest level in three years.

"Physical supply constraints are beginning to arise but do not appear to be as acute as labor shortages for most goods producers," Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note to clients.

Capacity use is still nearly 2 percentage points below the economy's historical average dating back to the early 1970s.

Economists surveyed by The Wall Street Journal had expected production to rise 0.6% and capacity utilization to hit 78.4% last month.

Wednesday's report showed mines increased output by 1.1% in April, largely reflecting renewed drilling for oil and natural gas. Mining output surged 10.6% from a year earlier.

Utility production rose 1.9% over the month and 6% over the year. Unusually cold weather in April boosted demand for heating.

Write to Josh Mitchell at joshua.mitchell@wsj.com

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