The maturing U.S. economic expansion continues to move back and forth, or two and fro, as the sayings go. This uneven up cycle was underscored once again within the past hour when the U.S. Commerce Department reported that industrial production fell by 0.5% last month. That was a notably sharper decline than consensus forecast, which had this metric easing by just 0.1%.
Moreover, figures for February and March were revised lower. Of note, industrial production was revised in February, from an initial estimated increase of 1.1% to a gain of 0.9%. In March, the estimated increase was pared back from 0.4% to just 0.3%. Clearly, the expansion is not being fueled as vigorously by the industrial sector as it had been earlier. We are showing, at best, some aggregate stability, as this sector has improved by 1.9% over the past 12 months.
Breaking this report down we find that manufacturing activity dipped by 0.4% in April, following a drop of 0.3% in March. This is by far the largest of the three industrial production categories maintained by the government. Also, mining output increased by 0.9% in April, following a drop of 0.6% in March and a surge of 1.8% in February. This metric has risen by 4.2% over the past year, from April through April.
Also, output at the nation's utilities tumbled last month, falling by an outsized 3.7%. That followed strong gains during the prior three months of, respectively, 2.5%, 1.0%, and 6.4%. This category is quite volatile, as such use depends heavily on the vagaries of the weather. The cold temperatures that spread across much of the country this past winter led in part to the heavy use of utility services.
The other half of the report contains data on factory utilization. Here, the nation's factories operated at 77.8% of capacity in April, down from an estimated 78.3% in March. Earlier, the March usage rate had been estimated at 78.5%. Thus, from the earlier reading there was a somewhat sharper contraction than initially tabulated. What's more, this was the weakest reading since this past January, when factories were operating at just 77.6% of capacity. At the recession's low point in 2009, usage was just 66.9%. So there has been a nice comeback staged over the past four years, but not enough of one to threaten the 1994-1995 average high of 85.0%.
Overall, this was a disturbing report, but was not a game changer yet, owing to the chronic volatility in these two series. We would need to see two or three months, or even a bit more of deteriorating activity to confirm a trend. Even so, this latest data suggest further that GDP growth will slow in the current three months, easing perhaps to the 1%-2% range from an estimated 2.5% in the opening quarter of this year.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.