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US Industrial Production Unexpectedly Slows in April

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US Industrial Production Unexpectedly Slows in April

US industrial production unexpectedly slowed in April, as gains in the mining sector were offset by a plunge in utilities and a broad-based decline in manufacturing.

Total industrial production declined at a pace of 0.6 percent in April, following a gain of 1 percent in February and March, the Board of Governors of the Federal Reserve reported today in Washington. Economists forecast no change for April.

Year-on-year, total production rose 3.5 percent, official data showed.

Among the major industry groups, the utilities sector was the hardest hit in April, as the arrival of warmer weather probably reduced demand for heating. Production in that sector fell 5.3 percent, following a gain of 0.6 percent the prior month. Year-on-year, utilities production declined 0.2 percent.

Production among manufacturers, which account for three-quarters of total production and about 12 percent of the economy, declined 0.4 percent, following two consecutive months of advances. Manufacturing production advanced 2.9 percent compared to April 2013.

Mining was the only major industry group to report gains in April, advancing 1.4 percent. Year-on-year, mining activity accelerated 8.3 percent, official data showed.

Industrial capacity utilization, which is used to gauge how fully companies are using their factory resources, unexpectedly declined 0.6 percentage point to 78.6. Economists forecast a slight drop to 79.2 percent. Capacity utilization was 1.5 percentage points below its long-run average, which covers the period 1972-2013.

The lack of growth in April raises concern US recovery may need more time to regain momentum after a weak quarter. Winter storms and unusually cold temperatures across the United States weighed on recovery this winter. The Commerce Department’s advance estimate of first quarter growth showed the economy barely grew. The latest trade data, combined with recent reports on construction and inventories, suggest the US economy actually contracted in the first three months of the year.

The Commerce Department will provide a revised estimate of first quarter growth May 29.

Early forecasts of second quarter growth suggest the US economy may expand 3.5 percent between April and June, according to a recent Bloomberg survey.

Despite the decline in manufacturing, output in this sector remains stable. The Institute for Supply Management’s gauge of national manufacturing activity accelerated further in April, led by broad advances throughout the goods-producing industries. In total, 17 of 18 manufacturing industries reported gains in April, as employers increased hiring at a sharper pace to account for growth in new business.

Fifteen of the 18 manufacturing industries covered by ISM reported increased hiring in April.

A separate reading from Markit Group showed output among US manufacturers in April expanded at the fastest rate in more than three years, as input costs reached an 11-month low. Overseas demand, while still weak, expanded at the fastest pace since August 2013.

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