WASHINGTON (Reuters] – The U.S. saw an increase in production of motor vehicles and other goods during April, which was more than what had been expected. These factors should be supportive for manufacturing activity.

The Federal Reserve announced Tuesday that manufacturing output rose 0.8% in April, following a similar increase in March. Reuters polled economists and predicted that factory output would rise 0.4%. The output jumped by 5.8% in April 2021 compared with April 2021.

Manufacturing, however, accounts for 12 percent of the economy and faces new supply chain challenges due to Russia’s invasion of Ukraine, as well as China’s zero-tolerance COVID-19 strategy.

In April, the Institute for Supply Management recorded a more than 1-1/2 year low for its index of national manufacturing activity. The New York Fed released Monday’s survey showing that factory activity declined in New York State in May, for the third year in a row.

Since March’s Fed interest rate hike, the dollar has gained 2.7% against major trade partners. This could hurt export demand and reduce manufacturing.

Auto plant output increased by 3.9% in April, after increasing 8.3% in March. Nonmetallic mineral products and electrical equipment saw the most significant gains. Furniture and similar products suffered losses.

A 1.6% increase of mining activity combined with an April rise in manufacturing output helped to boost industrial production by 1.1%. This follows a March increase of 0.9%.

The higher gasoline prices are causing a surge in production at mines. After a dip of 0.3% in March, Utilities’ production rose 2.4%.

The manufacturing sector’s capacity utilization, which measures how well firms use their resources in a given period, rose 0.6 percentage points to 79.2%, the highest since April 2007. It’s 1.1 percentage point higher than the long-run average.

From 78.2% March, the overall capacity utilization for industrial sectors jumped to 79.0%. The average 1972-2021 figure is just 0.5 points lower.

Fed officials look to capacity use indicators to gauge how much economic “slack” is left. This indicates how fast growth will continue to grow before it becomes inflationary.