Industrial production declined in April by the most in eight months, reflecting broad-based cutbacks in U.S. manufacturing that show factories will provide little support for the economy.
Output at factories, mines and utilities fell a more-than-forecast 0.5% after a revised 0.3% gain in the prior month that was weaker than previously reported. The median forecast in a Bloomberg survey called for a 0.2% decline. Manufacturing, which makes up 75 percent of total production, unexpectedly fell 0.4%, the third drop in four months.
But there was one part of today’s report on industrial output that wasn’t so disappointing — America’s booming energy sector. For example:
- The oil and gas extraction component of U.S. industrial production increased in April by almost 9% from a year ago to the highest level since April 1972, more than 40 years ago (see top chart).
- Crude oil production in April reached the highest level since April 1992, more than 20 years ago (see middle chart above), and increased by 16% from a year ago, and by 31% from two years ago.
- Another energy-related sector that is booming are the producers who manufacture the oil and gas field machinery that is being used for the increased drilling activity for shale gas and oil. In April, the output of oil and gas field machinery reached a new record high (see bottom chart above).
Despite a slowdown in U.S. manufacturing, the oil and gas sector is booming and is helping to provide strong support for the still somewhat tentative economic recovery. Thanks to shale gas and oil, America’s booming energy sector continues to provide shovel-ready jobs and continues to deliver a powerful energy-driven economic stimulus to the U.S. economy. The ongoing energy boom reflected in today’s Federal Reserve report provides further confirmation that energy remains the strongest sector of the U.S. economy.