Industrial Output Rises in April

Monday, May 15th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — Industrial production posted its biggest leap in April in more than a year as the output of utilities rebounded, the Federal Reserve said today.

Output at the nation's factories mines and utilities rose 0.9 percent, right on target with many analysts' expectations and the largest increase since a 1.8 percent gain posted in August 1998.

That followed a 0.7 percent increase in March, much stronger than the central bank previously predicted.

Operating capacity climbed from 81.7 percent in March to 82.1 percent in April, stronger than the 81.9 percent rise many analysts were forecasting. April's operating capacity was the strongest since a 82.4 percent rate recorded in May 1998.

The 82.1 percent operating capacity was a level about even with the average for 1967 to 1999.

Even with the 0.4 percentage point pick-up in operating capacity between March and April, capacity was still below levels usually associated with a pick-up in inflation.

Generally, an operating capacity of 84 percent would alarm economists, indicating that factories just can't produce fast enough — which could lead to price increases.

The Federal Reserve has boosted interest rates five times since June by a quarter-point each to slow the speeding economy and keep inflation under control.

Given the outlook for strong continuing growth, many analysts widely expect Fed policy-makers will boost rates again when they meet Tuesday. A growing number of economists are predicting the central bank will act more aggressively and raise rates by a half-point.

Whether the Fed choses a quarter-point or half-point increase may well be determined by the results of April's Consumer Price Index, which measures inflation pressures at the retail level. That report will be released Tuesday, the same day the Fed meets.

Many economists are predicting that April's consumer prices will hold steady. In March, the CPI shot up in part reflecting soaring energy costs. But crude-oil and gasoline prices edged down in April after surging the month before.

In April, utilities — gas and electric — led the growth in industrial production, boosting output by 2.8 percent, following a 1.8 percent decline the month before.

Ouput for manufacturing grew by a brisk 0.8 percent, down slightly from a 0.9 percent gain in March. Most major industries in that sector posted gains, the Fed said.

Mining output rose a moderate 0.4 percent in April, after posting a sizable 1 percent gain in March.

Despite rising interest rates, the industrial economy and even the interest-rate sensitive housing and construction sector have continued to be vibrant.