Fed industrial production indicator hits 101-year high

A worker in a GM plant

The Federal Reserve’s monthly industrial activity indicator hit its highest level in the index’s more than 100-year history, data released by the central bank showed on Friday, helped by a jump in auto production .

The Fed’s index for industrial production rose to 104.6 in March, an increase of 0.9%, despite supply chain disruptions and shortages caused by the war in Ukraine.

The index measures the increase or decrease in industrial production compared to the average of a given year – currently 2017. This means that last month’s industrial production was equal to 104.6% of its 2017 level, the highest level since the Fed began calculating the index in 1919.

“The strong performance of the industrial sector should give first-quarter gross domestic product growth a much-needed boost, especially with consumption hampered by high inflation,” wrote Tuan Nguyen, an economist at the audit and tax firm. RSM.

A surprisingly strong boost in industrial production is a welcome sign for the U.S. economy, as rising prices for oil, gas, staple crops, minerals and other key resources add to backlogs in the supply chain. supply around the world. COVID-19 shutdowns in China and heightened inspections of trucks entering Texas from Mexico have also added pressure on supply chains amid the highest annual inflation in more than 40 years.

Economists are increasingly concerned that the Fed may need to raise interest rates to levels high enough to significantly slow the economy to curb inflation.

“The vacuum in global and domestic demand, particularly in energy and production raw materials following the war in Ukraine, could have given American producers the opportunity to increase production,” Nguyen wrote.

Domestic auto production rose 7.8%, the biggest increase among manufacturing industries, and mining saw the biggest gain among commodity producers with a 1.7% increase.

“The total number of vehicles produced in March reached 9.75 million, the highest since January last year. But auto production remained subdued from pre-pandemic levels as manufacturers continued to cope to a shortage of chips,” Nguyen said.

Leave a Comment