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US industrial production rose 0.7% in April vs. 0.3% increase expected

A worker at the Aluminum Case Company in Chicago.
Tim Boyle | Bloomberg | Getty Images
A worker at the Aluminum Case Company in Chicago.

U.S. factory output expanded in April as makers of machinery and cars posted solid increases in production, a sign that the country's manufacturing sector was resisting the downward pull from sputtering global growth.

Manufacturing output rose 0.3 percent, the Federal Reserve said on Tuesday. The reading matched the gain expected in a Reuters poll of economists.

Overall industrial output rose 0.7 percent last month, beating the consensus forecast of a 0.3 percent gain, as utilities output rebounded from March when it was restrained by warmer-than-usual weather.

Mining output, another component of total industrial production, fell 2.3 percent in April.

The gain in factory output, coming after recent strong retail sales data, bolsters the view that the U.S. economy could re-accelerate in the second quarter after growing sluggishly in the first three months of the year.

The industrial sector has been undermined by a slowing global economy and robust dollar, which have eroded demand for U.S. manufactured goods. Manufacturing output has been flat or negative in four of the last six months.

But there are signs the worst of the industrial sector's downturn is over, with recent manufacturing surveys turning higher. In addition, the dollar's rally has fizzled and oil prices appear to be stabilizing.

Last month, production of long-lasting manufactured goods increased 0.6 percent. The largest gains in manufacturing came from producers of machinery, who increased output by 2.4 percent. Production of motor vehicles and auto parts increased 1.3 percent.

With output increasing last month, industrial capacity use jumped 0.5 percentage point to 75.4 percent.

Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.