U.S. factory production in April recorded its largest monthly increase in 14 months, driven by a rebound in the auto sector and rising demand for tech products amid an artificial intelligence investment boom. However, supply disruptions stemming from the U.S.-Iran conflict have cast a shadow over the manufacturing outlook. A survey released Friday by the Federal Reserve Bank of New York highlighted these risks, showing supplier delivery conditions in New York state deteriorated in May. The joint U.S.-Israel conflict with Iran has disrupted shipping through the Strait of Hormuz, pushing up energy prices, impacting global supply chains, and causing shortages in various goods including fertilizers, aluminum, and consumer products. The Producer Price Index (PPI) for April posted its fastest annual increase in four years. On Friday, statements from President Trump and the Iranian foreign minister dampened expectations for a swift agreement on issues related to maritime attacks and vessel seizures in the strait, leading to a rise in oil prices. "The overall picture is one of resilient manufacturing, supported by strengthening demand and continued output expansion," said Michael Gapen, Chief Economist at Morgan Stanley. "However, uncertainty around supply and prices skews the near-term risks to the downside." Data from the Federal Reserve showed U.S. manufacturing output rose 0.6% month-over-month in April, the largest gain since February 2025. The figure for March was revised upward from an initial reading of a 0.1% decline to a 0.1% increase. Economists surveyed by Reuters had anticipated a mere 0.2% rebound for April. On a year-over-year basis, factory output increased 1.3% in April.
Output of motor vehicles and parts surged 3.7% month-over-month. Output in the high-technology industries rose 1.0% (compared to 0.5% in March). Production of computers and peripheral equipment increased for a second consecutive month, up 1.5%, while semiconductors and related electronic components grew 1.0%, and communications equipment rose 0.6%.
Businesses are accelerating their deployment of artificial intelligence, with investments reaching tens of billions of dollars, providing a significant boost to the manufacturing sector, which accounts for 9.4% of the U.S. economy. AI-related spending contributed notably to the economy's 2.0% annualized growth rate in the first quarter. Excluding the high-tech and auto sectors, manufacturing output still grew 0.3% month-over-month in April (unchanged from March). Output of durable goods posted a strong 1.2% monthly increase. Production of nondurable goods edged down 0.1% month-over-month: chemical output fell 0.9%, and plastics and rubber products also declined 0.9%. However, petroleum and coal products output increased 1.0% for the second month in a row, and production of food, beverage, and tobacco products also rose.
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