U.S. industrial production increased more than expected in April, buoyed by strong manufacturing output, a Federal Reserve report showed on Friday.
The S&P 500 Index retreated sharply from record highs as bond yields surged higher on expectation that the Federal Reserve may have to revive rate hikes to contain inflation, triggered by the oil shock resulting from the Middle East conflict. The 10-year Treasury note climbed sharply to a one-year high of 4.5770%.
Transportation Equipment Boosts Output
Industrial output climbed 0.7% month over month (MoM), marking the biggest increase since March 2025, reversing the 0.3% drop in March. Economists had expected a more modest 0.3% increase for the month.
Industrial Output and Capacity Utilization
Source: Federal Rerserve
Among industry groups:
- Manufacturing output: +0.6% Vs. +0.1% in March (consensus 0.2%)
- Mining output: -0.1% Vs -1.6%
- Utility output: +1.9% Vs -1.4%
Among market groups, business equipment output climbed 1.5%, driven by a 4.2% surge in transit equipment, a category which includes aircraft, ships, railcars and other transportation machinery. Consumer goods output rose a more modest 0.8% and materials production increased 0.5%.
On a year-over-year (YoY) basis, industrial production climbed 1.4%, with manufacturing up 1.3%, mining 0.2% higher and utilities rising 2.7%. Business equipment outperformed with a 6% jump.
Capacity utilization increased 0.4 percentage points (ppt) MoM and 1.3 ppt from a year ago.
Reading the Rate Signals from Friday's Data
The data is also a pointer toward potentially elevated inflation as strong investment will add to demand side pricing pressure, tilting the Federal Reserve to a hawkish stance. That said, the strong data should be taken with a pinch of salt as transit equipment orders could be lumpy and may not sustain.
Regional manufacturing survey results released earlier on Friday showed an acceleration in activity to a more than four-year high. The outlook business conditions index also showed increased optimism.
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