US factory output fell 0.4 per cent in April after 2 strong months

Photo: The Canadian Press. All rights reserved.

In this March 26, 2014 picture, Ed Carbaugh prepares to install parts on a truck engine on an assembly line at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Md. The Federal Reserve reports on industrial production for April on Thursday, May 15, 2014. (AP Photo/Patrick Semansky)

WASHINGTON - U.S. factory output took a breather in April after two months of strong growth, as manufacturers produced less furniture, machinery and plastics.

The Federal Reserve said Thursday that factory production fell 0.4 per cent from the previous month after rising a revised 0.7 per cent in March and 1.5 per cent in February. Manufacturing output has risen a solid 2.9 per cent over the past year.

The decline appears to be a temporary setback that doesn't have economists too worried.

"We are not concerned by the drop in industrial production, because it was likely a one-time event" given healthy signals from other recent measures of manufacturing, said economists at Deutsche Bank Securities in a note to clients.

The Institute for Supply Management, a group of purchasing managers, has reported that U.S. manufacturing grew faster in April than March. Its manufacturing index rose to 54.9 last month from 53.7 in March as exports rose and factories stepped up hiring. Any reading above 50 signals growth.

The Commerce Department has said orders to U.S. factories for long-lasting manufactured goods showed decent gains in February and March.

Overall industrial output, which includes manufacturing, mining and utilities, fell 0.6 per cent in April, the Fed said. Output at utilities plunged 5.3 per cent; households used less heat as temperatures rose.

The drop in manufacturing output was more troubling, though economists say it probably just means factories eased back a bit after robust gains in February and March.

"Manufacturing was surprisingly weak, although the decline follows a strong finish" to the first quarter, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

The economy is picking up momentum after stalling during the nasty winter. The economy expanded at an annual pace of 0.1 per cent from January through March. Economists expect the pace to pick up to 3 per cent or faster this quarter and for the rest of the year.

Hiring also has been healthy. U.S. employers added 238,000 jobs from February through April, the fastest three-month pace in more than two years.