The March industrial-production activity report is out, and the numbers reflect a strengthening economy.
Production climbed 0.7% during the month, beating expectations for a 0.5% gain. February’s growth figure was revised up to 1.2% from an earlier estimate of 0.6%.
Consumer goods, business equipment, construction, and materials all saw growth.
The capacity-utilization rate jumped to 79.2% from 78.4% a month ago. This is much tighter than the 78.7% expected.
Economists have argued that a rising capacity-utilization rate will eventually lead to more hiring and growth investments.
“[T]here is a slight lag but a decent 65% historical correlation,” said Gluskin Sheff economist David Rosenberg of capacity utilization and capital expenditures. “History also shows that once 77% is breached in terms of CAPU rates in an up-cycle, capital spending in real terms in the ensuing years averages out to be 0% growth — enough to add an increment 60 basis points to headline GDP trends.”
Here’s a table breaking down the market and industry groups: