According to a Federal Reserve report, American factories recorded a 1.3% increase in production in April. on an annual basis. The production of motor vehicles and their parts increased by 3.7%, and advanced technology industries recorded an increase by 1%.continuing the positive trend from March. In particular, the production of computers and peripheral devices increased by 1.5%. for the second month in a row, and semiconductors and communications equipment by 1 percent, respectively. and 0.6 percent
However, rising tensions in the Middle East region, especially in the Strait of Hormuz, have led to disruptions in global supply chains. Rising energy prices and shortages of raw materials such as aluminum and fertilizers are putting pressure on American industry. As a report by the New York branch of the Federal Reserve highlights, the efficiency of deliveries from local suppliers deteriorated in May, and a Order fulfillment times reached the highest level in 4 years.
— Overall, higher demand and continued production growth point to a certainty resilience of the industrial sector – noted Michael Gapen, chief economist at Morgan Stanley. However, he added that uncertainty over the availability of raw materials and rising costs poses a serious risk to future development.
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Artificial intelligence supports the economy
Investments in artificial intelligence have become one of the key factors driving American industry. Enterprises are pouring billions of dollars into AI technologies, which has contributed significantly GDP growth by 2 percent in the first quarter of this year. Spending in this area is supportive the industrial sector, which accounts for 9.4 percent. American economy.
Despite these positive data, the production of non-durable goods fell by 0.1% in April, and the production of chemicals decreased by 0.9%. In turn, the production of petroleum and coal products increased by 1%.which is the second consecutive month of growth in this segment.
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Inflation and interest rate problems
Rising oil prices and inflation influenced the situation on financial markets. Bond yields reached their highest level in a year and the dollar strengthened against other currencies. Markets predict that The Federal Reserve will maintain interest rates at 3.50-3.75 percent. until next yearwhich may limit the positive impact of tax cuts on industry.
According to Stephen Brown, chief economist for North America at Capital Economics, the decline in production in the mining sector, despite higher oil prices, shows that producers are cautious about increasing production. “This second consecutive decline, despite higher oil prices, should come as a cold shower to those who are counting on U.S. production growth to help offset supply losses from the Middle East,” Brown noted.
Increased capacity utilization
Total U.S. industrial production increased 0.7% in April, and the capacity utilization rate reached 76.1%, an increase of 0.4 percentage points compared to March. Despite this, this value remains 3.3 percentage points below the average of recent decades. Utilities production increased 1.9%, mainly due to increased demand for electricity and natural gas.
