The third consecutive monthly increase in U.S. factory activity was fueled by a dramatic comeback in automobile output in March, possibly hinting that the worst of the production troubles that have plagued the auto industry over the last year is passed.
The Federal Reserve reported on Friday that overall industrial production grew 0.9 percent in March, matching February’s upwardly revised rate. Factory output was expected to increase by 0.4 percent, according to economists polled by Reuters. In comparison to the previous year, output increased by 5.5 percent.
During the COVID-19 epidemic, spending shifted from services to products, benefiting manufacturing, which accounts for 11.9 percent of the American GDP. However, manufacturers have struggled to meet high demand as labor markets have tightened and supply bottlenecks have continued as a result of COVID lockdowns in China and the war in Ukraine.
The automobile industry has been particularly badly hit by supply concerns, with production slowed for more than a year by a global scarcity of electronic components, particularly the computer chips required for today’s increasingly complicated vehicle operating systems.
Capacity utilization indicators are often used by Fed officials to determine how much “slack” remains in the economy, or how far expansion can go before it becomes inflationary.
A separate data released on Friday by the New York Federal Reserve revealed that manufacturing activity in New York state accelerated in April, despite rising inflationary pressures.
After a score of negative 11.8 in March, the Empire State Manufacturing Index jumped to a four-month high of 24.6. The survey’s prices paid index increased to 86.4 from 73.8 the previous months, a new high.
However, optimism in the future has diminished, with the six-month outlook score slipping to 15.2 from 36.6 in March, the lowest level in nearly two years.