Motor vehicles, AI boost US manufacturing production; supply shortages from war loom

U.S. factory production rose 0.6% in April — the biggest monthly gain in 14 months — powered by motor vehicles (+3.7%) and a surge in high-technology output tied to AI spending. Industrial production overall climbed 0.7% and capacity utilization nudged up to 76.1%. However, supply disruptions from the U.S.-Israeli conflict with Iran have tightened delivery times, pushed oil prices higher and increased inflationary pressures, prompting markets to trade cautiously: stocks fell, longer-dated Treasury yields hit one-year highs and the dollar strengthened. The combination of stronger activity and supply-side risk leaves the near-term outlook mixed and supports expectations that the Fed will keep rates around 3.50%–3.75%.