Wells Fargo: US strong production still encouraging

Data released on Tuesday showed Industrial Production rose 1.1% in April. Analysts at Wells Fargo point out that US factories, mines and energy producers together called more capacity into service than at any other time since the start of the pandemic. They warn supply chains are not fixed and could worsen in the coming months.

Key Quotes:

“Continued strength in production in the face of persistent supply issues is still encouraging and demonstrates increased activity amid an easing of some constraints. Our tracker of progress, the Pressure Gauge, continues to demonstrate a slow easing in constraints.”

“Supply chain issues, product shortages and difficulty finding labour are still key headwinds, but businesses are plodding ahead. In a rare event, every major category posted an increase in production in April; that was true whether broken out by industry group or market group.”

“Despite growing concern over the slowing of the broader economy amid a tighter policy environment, capital spending remains intact. Demand has not yet showed many signs of slowing as consumers’ demand for goods has held up and businesses still need to replenish depleted inventory levels.”

“Price pressure remains elevated, but inventories have bottomed, unfilled orders are growing at a slower rate and delivery times, while still long by historic standards, have shortened.”