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Output at US factories increased in April as operations at plants that were damaged by February’s stormy weather in the South came back online, offsetting a decline in the production of motor vehicles.

Manufacturing production rose 0.4% last month after surging 3.1% in March, the Federal Reserve said on Friday. Manufacturing production remains a touch below its pre-pandemic level. “An important contributor to the gain in factory output was the return to operation of plants that were damaged by February’s severe weather in the south central region of the country and had remained offline in March,” the Fed said.

“The weather-induced drop in total industrial production in February and the subsequent rebound in March are now estimated to have been larger than reported last month.” Economists polled by Reuters had forecast manufacturing output would increase 0.4% in April.

Manufacturing, which accounts for 11.9% of the US economy, is being underpinned by massive fiscal stimulus and a shift in demand to goods from services because of the coronavirus pandemic.

But the demand boom has led to a shortage of raw materials across the industry. The pandemic also is keeping some workers at home, adding to the supply constraints.

A global semiconductor crunch has forced automakers in the United States to slash production. Output at auto plants dropped 4.3% in April. Excluding autos, manufacturing output rose 0.7%.

The rise in manufacturing output combined with a 2.6% increase in utilities to lift industrial production by 0.7% last month. That followed a 2.4% increase in March. Mining production gained 0.7%.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, rose to 74.1 from 73.8 in March. Overall capacity use for the industrial sector was up 0.5 percentage point to 74.9%. It is 4.7 percentage points below its 1972-2020 average.

Officials at the US central bank tend to look at capacity use measures for signals of how much “slack” remains in the economy - how far growth has room to run before it becomes inflationary. (Reporting by Lucia Mutikani


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RETAIL SALES UNCHANGED: US retail sales unexpectedly stalled in April as the boost from stimulus checks faded, but an acceleration is likely in the coming months amid record savings and a reopening economy.

The Commerce Department said on Friday the unchanged reading in retail sales last month followed a 10.7% surge in March, an upward revision from the previously reported 9.7% increase.

Economists polled by Reuters had forecast retail sales would rise 1.0%. Retail sales surged 51.2% on a year-on-year basis.

Last month’s unchanged reading in sales came as a 2.9% rise in motor vehicles purchases was offset by declines in spending elsewhere. Sales at clothing stores tumbled 5.1%. There were also decreases in sales at sporting goods, hobby, musical instrument and book stores. Sales at building material stores slipped 0.4%. Online retail sales fell 0.6%.

But consumers increased spending at restaurants and bars, leading to a 3.0% rise in receipts. That followed a 13.5% jump in March. Sales at restaurants and bars are 116.8% higher compared to April 2020.

Economists expect demand to swing back to services from goods as vaccinated Americans venture out to places like restaurants and bars after being cooped up at home for more than a year. Receipts at electronics and appliance stores rose 1.2%. Sales at furniture stores dropped 0.7%.

Many qualified households received additional $1,400 checks in March, which were part of the White House’s $1.9 trillion COVID-19 pandemic rescue package approved early that month.

Retail sales account for the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the other portion. Households have accumulated at least $2.3 trillion in excess savings during the pandemic, which should underpin spending this year.

US stocks were set to open higher. The dollar was trading lower against a basket of currencies. US Treasury prices rose.

Coming on the heels of news this month that hiring slowed in April amid a shortage of workers, the weak sales could cause anxiety about the economic recovery. Though more than a third of Americans have been fully vaccinated against COVID-19, fears about the virus linger and schools have not fully reopened for in-person learning, keeping many workers at home.

Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.5% last month after an upwardly revised 7.6% increase in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have shot up 6.9% in March.