U.S. industrial production rose 0.7% month-on-month in April, the largest increase in over a year, with demand for automobiles and data centers serving as the main drivers.

U.S. industrial production rose 0.7% month-on-month in April, the largest increase in over a year, with demand for automobiles and data centers serving as the main drivers.

U.S. industrial production data showed a strong rebound, demonstrating unexpected resilience in manufacturing under the dual pressures of tariffs and geopolitical conflicts. However, analysts warn that part of the growth may be driven by companies stockpiling ahead of time, casting doubt on its sustainability.

The Federal Reserve released data on Friday, showing U.S. industrial output in April increased by 0.7% month-on-month, far exceeding economists' forecast of 0.3%, and surpassing the highest estimate among Bloomberg-surveyed economists, marking the largest single-month gain in over a year. Meanwhile, the March data was revised from a previously reported decline to a narrower decrease, further strengthening recovery signals.

After the data release, market sentiment toward the manufacturing outlook turned more optimistic. Bloomberg economist Stuart Paul pointed out that durable goods output was the main driver of April’s industrial surge, with a rebound in automobile production accounting for about one-third of the overall increase. The simultaneous rise in metal, mining, agricultural equipment, and electronic products output also indicates strong business investment early in the second quarter.

Manufacturing leads gains, prominent contributions from automobiles and durable goods

In April, U.S. manufacturing output rose by 0.6% month-on-month, higher than March’s 0.1%, with a significantly faster pace. As manufacturing accounts for about three-quarters of total industrial output, it was the main driver of improved industrial activity for the month.

Looking further, durable goods output increased by 1.2% month-on-month, with general recovery across categories except for a few. Among them, automobile and parts output jumped 3.7%, making the largest contribution; computers & electronics, aerospace, and non-metallic mineral products also saw notable growth.

Notably, categories related to data center construction performed well, with output of electrical equipment and metal products trending upward. Defense and aerospace equipment output grew for the fifth consecutive month. Economists said that as the government replenishes ammunition and equipment depleted by wartime consumption, military spending is expected to continue supporting economic growth this year.

By contrast, non-durable manufacturing output decreased marginally by 0.1% month-on-month. Chemical, plastic, and rubber products each fell by 0.9%, but gains in food, beverages, tobacco, printing, and petroleum/coal products partially offset these declines.

In terms of capacity utilization, factory utilization rose to 75.8%, the highest since last September. Overall industrial capacity utilization climbed to 76.1%, higher than the market forecast of 75.8%.

Meanwhile, data released on the same day showed New York state factory activity expanded at its fastest pace in four years in May, and business optimism about the outlook increased, corroborating the industrial production data.

Turning to other industrial sectors, utility output in April rose by 1.9%, with contributions from both electricity and natural gas. Mining output fell 0.1% month-on-month, continuing the weak trend after a 1.6% drop in March, with oil and gas drilling activity declining for a second consecutive month.

Stockpiling uncertainty and ongoing geopolitical risks

Despite strong overall data, Bloomberg noted that some growth may reflect companies’ early stockpiling to avoid upcoming price increases, rather than sustained expansion in real demand, raising questions about the data's sustainability.

The current geopolitical situation marks deeper uncertainty. The Strait of Hormuz is effectively still closed, and the fragile ceasefire agreement has yet to result in a substantial reopening. Bloomberg quoted economists as saying even if the strait reopens soon, as oil output normalizes and shipping flows resume, inflationary pressures may persist, and manufacturers could face further increases in fuel and raw material costs in the months ahead.

According to the U.S. Energy Information Administration, fueled by war-driven higher oil prices, some domestic producers have started expanding capacity. U.S. crude oil production is expected to reach a historic high of 14.1 million barrels a day by 2027, but output this year is projected to remain around 13.6 million barrels a day.

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