This morning, the Federal Reserve, which is also scheduled to release its latest Beige Book summation of economic conditions later today, reported that industrial production for the month of March rose 0.7% after climbing 1.2% in the prior month. The report, along with a solid reading earlier this month on manufacturing activity from the Institute for Supply Management, an Arizona-based trade group, indicates steady growth in the manufacturing sector. Such data are yet another indication that the U.S. economy is strengthening and, along with an encouraging report on the labor market this month, should allow the central bank to stay the course with regard to tapering its monthly bond-buying program.
The primary catalysts behind the March performance were increases in utilities (up 1.0%) and mining (+1.5%) output. Overall, total industrial production was up a healthy 3.8% for the 12-month period ending in March. Meantime, capacity utilization rose to 79.2 last month, which was 0.9 percentage point below its long-run (1972-2013) average, but 1.2 percentage points higher than the prior year.
As noted, the latest improvement in industrial production and capacity utilization—the expectation was that industrial production would rise by 0.5% in March—is another indication that manufacturing activity in the U.S. is strengthening and even more encouraging given the severe winter weather that blanketed much of the country for the first two-plus months of this year. The uptick in industrial production, along with notable improvements in a few other important sectors of the economy, including the labor market, which added 192,000 new jobs last month, gives us some confidence that GDP growth will pick up further in the back half of 2014.
At the time of this writing, the author did not have positions in any of the companies mentioned.