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Industrial production rises
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May 15, 2000: 3:31 p.m. ET
Output gains 0.9% in April while capacity use increases to 82.1%
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NEW YORK (CNNfn) - U.S. industrial production posted its biggest monthly increase in more than a year and a half in April, the Federal Reserve reported Monday, reflecting robust consumer spending and demand for American-made goods -- even as interest rates continued to rise.
 Production at U.S. mines, factories and utilities rose 0.9 percent in April, the Fed said, above March's revised 0.7 percent gain and the 0.8 percent increase expected by economists polled by Briefing.com. It was the largest gain since a 1.8 percent jump in output in August 1998, the Fed said.
The capacity-utilization rate, which measures the amount of industrial capacity in use, increased to 82.1 percent in April from 81.7 percent in March. The rate was the highest since May 1998 and indicates U.S. factories are running their production lines at a hefty clip to meet demand.
The report, released a day before the Fed's policy-making arm meets to discuss raising short-term interest rates again to slow economic growth, provided more evidence to analysts and investors that the U.S. economy is expanding at a pace that could stoke inflation pressures.
A marked strengthening
"This is a strong report: Manufacturing output has strengthened markedly in the past two months, following a lackluster showing in February," said Ian Shepherdson, chief U.S. economist with High Frequency Economics.
 The pace of the U.S. economy has been of principal concern to Fed Chairman Alan Greenspan and his colleagues for some time, even though no discernable signs of widespread inflation pressures have appeared on the horizon.
That's because consumers, feeling secure in their jobs due to a tight labor market and flush with big returns in the equity market, have continued to spend in the face of rising borrowing costs. U.S. consumer spending posted its biggest jump in 17 years in the first quarter, leaving stockpiles at historic lows.
That's why the Federal Open Market Committee is widely expected to raise the fed funds rate -- the target for overnight loans between commercial banks -- to 6.5 percent from 6 percent at the conclusion of its meeting tomorrow, a move meant to discourage consumers from borrowing and spending money. That would bring the fed funds rate to its highest level in nine years.
Big-ticket buying binge
"Although higher interest rates appear to have begun to have a negative impact on housing activity and consumer spending, sturdy domestic demand and improving international economies have generated an acceleration in manufacturing activity," said Steven Wood, an economist with Banc of America Securities in San Francisco.
Production of big-ticket items led much of April's gain, according to the Fed's report. Car and truck production increased 3.3 percent last month after gaining 1.1 percent in March, while production of refrigerators, stoves and other household appliances declined 3.9 percent, reversing March's 1.7 percent gain.
Mining output rose 0.4 after rising 1 percent in March, the Fed said. Output at utilities rose 2.8 percent after dropping 1.8 percent in March. Production of semiconductors gained 3.1 percent, about half the 6.9 percent gain recorded in March, reflecting continued demand for computers and wireless phones. 
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