The fourth strongest gain in the industrial output post

After a 0.9 percent gain in March, industrial production rose 1.1 percent in April, 1.0 percent in February, and 0.8 percent in January. The gains resulted in a very strong 11.9 percent annual growth for the first four months of 2022, pushing total industrial production to a record high and above the December 2019 level before the epidemic (see first chart). In the last one year, the total industrial production has increased by 7.4 percent.

Total industrial capacity utilization rose 0.8 points from 79.2 percent in March to 79.0 percent, the highest since December 2018 (see first chart). However, total power consumption is slightly lower than the long-term (1972 to 2021) average of 79.5 percent.

Manufacturing output – about 74 percent of total output – grew 0.9 percent month-on-month, as well as a fourth consecutive strong gain (see first chart). Production output is at its highest level since July 2008 and is 4.4 percent above the December 2019 pre-epidemic level (see first chart). Compared to a year ago, production output increased by 5.8 percent.

Production usage rose 0.6 points to 79.2 percent, above the December 2019 level of 75.6 percent and the highest level since April 2007, and above its long-term average of 78.1 percent. However, it remained below the 1994-95 high of 84.7 percent (see first chart).

Mining output posted about 14 percent of total industrial production and a strong 1.6 percent increase last month (see the top of the second chart). In the last 12 months, mining output has increased by 8.6 percent.

Utility output, which is typically related to weather patterns and about 12 percent of total industrial production, jumped 2.4 percent (see second chart top) with natural gas growing 4.4 percent and electricity 2.1 percent. Since a year ago, utility output has increased by 7.5 percent.

Among the key components of industrial production, energy production (approximately 27 percent of total production) increased by 1.8 percent per month (see second chart below) with gains across all five components. Total energy production increased by 7.6 percent year-on-year.

Motor-vehicle and parts production (slightly less than 5 percent of total output), one of the industries most affected by lockdown and post-lockdown recovery, continued to be affected by the shortage of semiconductor chips, although output rose again in April. Motor-vehicle and parts production rose 3.9 percent month-on-month (8.3 percent in March) (see second chart below). Compared to a year ago, vehicle and parts production increased by 17.0 percent.

Total vehicle assembly has grown to 10.58 million at a seasonally consistent annual rate. Of which 10.26 million are light vehicles and 0.32 million are heavy trucks. Among light vehicles, light trucks were 8.42 million and cars 1.84 million.

The selected high-tech industry index fell 0.3 percent in April (see second chart below) but rose 8.3 percent from a year earlier. The high-tech industry accounts for only 1.9 percent of total industrial production.

Combined with all other industries (excluding energy, high technology and motor vehicles; total; about 67 per cent of total industrial production) rose 0.6 per cent in April (see second chart below). This important segment is 5.2 percent above April 2021.

Industrial production posted a strong, broad-based gain in April, the fourth strongest gain in a row. Barriers to labor supplies, rising costs and equipment shortages, and logistical and transportation barriers continue to challenge manufacturers, with output increasing significantly, not enough to meet the high demand that has been met since the lockdown recession.

Deficits are contributing to sustained upward pressure on prices. Combined with the ongoing wave of new COVID-19 cases around the world, particularly China, the impediment surrounding the Russian invasion of Ukraine and a new Fed tightening cycle, a higher level of uncertainty for the economic outlook continues.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob previously headed Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.

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