Industrial production increased more than forecast in March, led by a rebound in consumer goods manufacturing, a sign that factories will keep driving the U.S. economy. Output rose 0.8 percent, the fifth straight gain, after a revised 0.1 percent rise in February, the Federal Reserve said today in Washington. Economists surveyed by Bloomberg News projected a 0.6 percent gain, according to the median estimate. Manufacturing, which makes up 75 percent of the total, climbed 0.7 percent following a 0.6 percent increase. Utility output and mining also rose. Factories in the U.S. are benefiting from gains in business investment, expanding economies overseas and inventory rebuilding. The pace of production may cool temporarily as some factories scramble to replace supplies of parts interrupted after last month’s earthquake and tsunami in Japan. “Manufacturing is still at the forefront of the recovery,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “April, May production is likely to ease somewhat. Supply shortages are being seen.” Estimates in the Bloomberg survey of 82 economists ranged from 0.2 percent to 1 percent. February production was initially reported as unchanged. Other figures today showed manufacturing in the New York region expanded this month by the most in a year. The Federal Reserve Bank of New York’s so-called Empire State factory index increased to 21.7 from 17.5 the prior month. Readings greater than zero signal growth. The cost of living increased in March for a ninth straight month, led by increases in food and fuel, a Labor Department report showed. Consumer Prices The consumer-price index increased 0.5 percent for a second month. Excluding volatile food and energy, the so-called core gauge rose 0.1 percent, less than forecast and restrained by lower clothing expenses and smaller gains in medical care, according to Labor Department figures. Capacity utilization, which measures the amount of a plant that is in use, rose to 77.4 percent last month, the highest since August 2008, from a revised 76.9 percent in February, today’s Fed report showed. The gauge compares with the average of 79.5 percent over the past 20 years. Mining production, which includes oil drilling, increased 0.6 percent in March after a 0.3 percent gain. Utility output climbed 1.7 percent last month, the first increase this year. Motor Vehicle Production Output of motor vehicles and parts climbed 3 percent in March after rising 4.6 percent a month earlier. “Manufacturing activity remains very strong,” Jenny Lin, a senior U.S. economist for Ford Motor Co. (F), said on an April 1 conference call. “Interest rates remain very low. Consumer conditions are improving.” Crude oil for May delivery rose to $108.11 a barrel on the New York Mercantile Exchange yesterday. Consumer goods production rose 0.9 percent following no change in the prior two months. Production of business equipment climbed 0.4 percent after a 1 percent gain. Output of computers and electronic products rose 0.5 percent after increasing 1.7 percent. The economy expanded at a “moderate” pace across much of the U.S. in February and March, led by manufacturing, with labor markets showing improvements in most regions, the Fed said this week in its Beige Book report. All 12 districts reported a pickup in manufacturing since the March report, with regional industries expanding including auto and auto parts, commercial aircraft and fabricated metal products, the Fed said. The manufacturing industries that account for 11 percent of the economy are likely to remain at the forefront of the recovery as consumers step up spending and businesses replenish inventories and buy new equipment. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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