Summary: US industrial output up 1.1% in April; above market expectations; up 6.4% over past 12 months; “consistent with very solid demand pulse”; capacity utilisation rate up 0.8ppt to 79.0%, still short of long-term average.
The Federal Reserve’s industrial production (IP) index measures real output from manufacturing, mining, electricity and gas company facilities located in the United States. These sectors are thought to be sensitive to consumer demand and so some leading indicators of GDP use industrial production figures as a component.
US production collapsed through March and April of 2020 before recovering the ground lost over the fifteen months to July 2021.
According to the Federal Reserve, US industrial production expanded by 1.1% on a seasonally adjusted basis in April. The result was substantially greater than the 0.4% which had been generally expected and above March’s 0.9% increase. On an annual basis, the growth rate picked up from March’s revised figure of 5.4% to 6.4%.
“All up, the data are consistent with a very solid demand pulse,” said ANZ Head of Australian Economics David Plank.
The figures were released on the same day as April’s retail sales report and US Treasury bond yields moved considerably higher, especially at the short end. By the close of business, the 2-year Treasury yield had jumped 13bps to 2.69%, the 10-year yield had gained 10bps to 2.99% while the 30-year yield finished 8bps higher at 3.18%.
The same report includes US capacity utilisation figures which are generally accepted as an indicator of future investment expenditure and/or inflationary pressures. Capacity usage had hit a high for the last business cycle in early 2019 before it began a downtrend which ended with April 2020’s multi-decade low of 64.2%. April’s reading increased from March’s revised figure of 78.2% to 79.0%, still short of the long-term average of 80.1%.
While the US utilisation rate’s correlation with the US jobless rate is solid, it is not as high as the comparable correlation in Australia.
