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BLBG: Industrial Production in U.S. Rises More Than Forecast
 
Industrial production rose more than forecast in March after a February gain that was twice as big as previously estimated, indicating U.S. factories recovered after a weather-depressed start to the year.

Output at factories, mines and utilities climbed 0.7 percent after a revised 1.2 percent increase the prior month, figures from the Federal Reserve showed today in Washington. The median forecast in a Bloomberg survey of economists called for a 0.5 percent rise. Manufacturing (IPMGCHNG), which makes up 75 percent of total production, grew 0.5 percent after surging 1.4 percent.

The figures follow recent data showing stronger retail sales and increasing employment that indicate the economy was gaining momentum as temperatures warmed. A pickup in corporate investment and further improvement in overseas markets would complement demand for motor vehicles and provide an additional boost for U.S. producers.

“There’s a lot of pent-up demand among consumers and businesses, and factories have to produce those goods,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who correctly projected the gain in production. “The outlook for the manufacturing sector has brightened and will continue to do so.”

The strength in manufacturing is helping make up for a struggling housing industry. Another report today showed home construction rebounded less than forecast in March and building permits declined. Housing starts climbed 2.8 percent to a 946,000 annualized rate, according to the Commerce Department. The median forecast in a Bloomberg survey called for 970,000 starts.

Stocks rose after the manufacturing figures and as earnings from Yahoo! Inc. topped estimates. The Standard & Poor’s 500 Index added 0.6 percent to 1,853.78 at 9:39 a.m. in New York.

Economists’ Estimates

Industrial production estimates of the 79 economists surveyed by Bloomberg ranged from no change to an increase of 1 percent after a previously reported 0.6 percent increase. Manufacturing accounts for about 12 percent of the economy.

Utility output rose 1 percent after a 0.3 percent drop the previous month. Mining production, which includes oil drilling, increased 1.5 percent last month.

The report is consistent with data from the Institute for Supply Management that showed manufacturing accelerated in March, driven by production and orders.

Business-equipment production advanced 0.5 percent after a 2 percent surge in February today’s Fed report showed. Output of construction materials rose 0.2 percent after rising 1 percent. Production of computers and electronic products also increased.

Consumer Goods

Consumer goods production rose 0.7 percent, led by appliances, furniture and carpeting.

The output of motor vehicles and parts decreased 0.8 percent after soaring 6.9 percent a month earlier, according to today’s report. Excluding autos and parts, industrial production increased 0.8 percent last month after a 0.9 percent gain.

Vehicle sales at Ford Motor Co. (F), Chrysler Group LLC and Toyota Motor Corp. beat analysts’ estimates in March as a pickup in consumer confidence and warmer weather encouraged Americans to return to auto dealers and shopping malls. Cars and light trucks sold last month at the fastest pace since May 2007, data from Ward’s Automotive Group showed.

Aluminum Demand

The auto sector will probably remain a mainstay for manufacturers. Alcoa Inc. posted a higher-than-projected profit as demand from American automakers helped offset a flood of aluminum from China that’s driving down prices across the industry.

“The opportunity in auto is tremendous,” Chairman and Chief Executive Officer Klaus Kleinfeld said in a telephone interview on April 8. Kleinfeld told analysts on a conference call that Alcoa’s sales of auto sheet will rise to $1.3 billion in 2018 from $330 million this year. He sees demand growth driven by developments such as Ford’s new lightweight aluminum-bodied F-150 pickup truck.

Household demand is improving as the winter chill fades and employment rises. Private payrolls climbed to 116.1 million in March, and have made up all the jobs lost as a result of the recession.

Warmer weather helped lift retail sales in March by 1.1 percent, the biggest gain since September 2012, figures showed earlier this week.

Capacity utilization, which measures the amount of a plant that is in use, rose to 79.2 percent, the highest since June 2008, from a revised 78.8 percent the prior month, today’s data showed. Factory capacity climbed to 76.7 percent, the highest in almost six years.

To contact the reporter on this story: Shobhana Chandra at schandra1@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle
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