Industrial Production Rises .5% in March, Bloomberg News Reports

U.S. Industrial Production Increased in March for the fifth time in six months. Manufacturers benefited from growing demand.

From AP and Bloomberg newswires

Output at factories, mines and utilities rose 0.5 percent in March, according to the median of 68 forecasts in a Bloomberg News survey of economists, after a 0.7 percent gain in February. The share of industrial capacity in use probably rose to 81.4 percent, the highest since September 2000, from 81.2 percent.

Companies such as Boeing Co. are receiving more overseas orders as growth in Europe and Japan accelerates. U.S. businesses are also expanding factory space and updating equipment as resources become scarce. Those capacity constraints pose a risk of inflation that may cause Fed policy makers to raise their target interest rate at least once more.

Economists' estimates of the gain in industrial production ranged from 0.2 percent to 0.7 percent. Forecasts for capacity utilization ranged from 80.5 percent to 81.8 percent.

Higher-than-average operating rates increase the risk that bottlenecks will develop in the production process, leading manufacturers to raise prices. A jobless rate at a four-year low also increases the possibility that inflation will flare.

American companies are also loosening their purse strings in order to update equipment as demand improves. U.S. chief information officers expect to spend more on information technology over the next 12 months than they planned last quarter, according to a survey by CIO Magazine earlier this month.

Production at gas and electric utilities, which had gyrated wildly in January and February because of unusual weather, posted a 0.5 percent increase in March.

Economists look at this capacity utilization figure for clues about the future inflation climate. For instance, if plants were running at full tilt and couldn't crank out enough goods to satisfy customers' demand, then there could be a run up in prices.

The Federal Reserve boosted a key interest rate to a five-year high on March 28, the latest in a series of rate-raising moves since June 2004 to keep inflation in check. Analysts expect another rate increase on May 10, the Fed's next meeting.

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