U.S. factory production fell in May by the most since January 2014, weighed down by fewer truck assemblies and still consistent with a steady outlook for manufacturing, Federal Reserve data showed Friday.
Highlights of Industrial Production (May)
- Factory output fell 0.7% (est. unchanged) after rising an upwardly revised 0.6% gain.
- Total industrial production, which also includes mines and utilities, decreased 0.1% (est. 0.2% rise) after an upwardly revised 0.9% gain.
- Capacity utilization, measuring the amount of a plant that is in use, dipped down to 77.9% (est. 78.1%) from 78.1%.
Key Takeaways
The pullback in factory output largely reflects a disruption in truck assemblies due to a major fire at a parts supplier, the Fed said in the report. Excluding motor vehicles and parts, manufacturing production fell just 0.2% following a 0.8% gain the prior month.
The Fed's monthly data are volatile and often get revised. Manufacturing, which makes up 75% of total industrial production, accounts for about 12% of the U.S. economy.
Other recent reports have indicated factories are on steadier ground. U.S. manufacturing expanded at a faster pace in May, with order backlogs rising by the most in 14 years, while prices for materials continued to pick up, according to a survey released earlier this month by the Institute for Supply Management.
Along with supply constraints that are pushing up materials prices, escalating concerns about tariffs pose a headwind to manufacturing. A stronger dollar also threatens to undermine demand for U.S. exports. At the same time, lower corporate and consumer taxes and a strong job market that's boosting household demand will underpin business investment in coming months.
The factory-use rate cooled to 75.3% from 75.9% a month earlier, and remains 3 percentage points below its long-run average.
Other Details
- Utility output rose 1.1% after climbing 3.2% the prior month.
- Production of motor vehicles and parts decreased 6.5% after falling 2.2% the prior month; excluding autos and parts, total industrial output rose 0.3%.
- Mining production rose 1.8%; oil and gas well drilling increased 3.9%.
- Production of consumer goods fell 1%, and output of business equipment dropped 1.1%.
- Construction output rose 0.1%.
By Shobhana Chandra
