Industrial Production Was a Mixed Bag in April

The industrial sector is a mixed bag in 2023. Industrial production rose 0.5% in April, above the consensus forecast for no (0.0%) change; But March was revised to no change from a 0.4% increase in the prior release, and February was revised down modestly, too. Manufacturing production jumped 1.0% after falling 0.8% in March, which was revised from a 0.5% decline previously. Mining production rose 0.6% after falling 1.3% in March, also revised from a 0.5% decline in the prior release.

Utilities output fell 3.1% after surging 8.4% in March (unrevised). From a year earlier, industrial production edged up 0.2%, with manufacturing down 0.9%, mining up 5.6%, and utilities output down 0.4%. However, manufacturing production is down 0.9% from last October. Mining output is down 1.3% from January, with a drag from lower oil prices weighing on the rig count.

The motor vehicle assembly rate rose to 11.40 million units at a seasonally-adjusted annualized rate (SAAR) in April from 10.03 million SAAR in March and was the highest since July 2020. The auto industry is humming as the chip shortage fades in the rearview. But that is an exception for manufacturers, who face headwinds from wholesalers and retailers adding to inventories more slowly and weaker demand from the housing market.

Reflecting this, the industrial capacity utilization rate was 79.7% in April. That’s up from 79.4% in March but down a hair from the prior release’s March print of 79.8%. Capacity utilization is down from 80.8% last September, which was the highest since 2008. With more headwinds than tailwinds, Comerica forecasts for industrial production to edge down 0.7% in 2023 after very strong growth of 3.4% in 2022 and 4.4% in 2021. A slightly cooler industrial sector and a more normal level of industrial capacity utilization will help to slow inflation. 

Bill Adams is a senior vice president and chief economist at Comerica. Waran Bhahirethan is a vice president and senior economist at Comerica.

Source: Comerica