U.S. Industrial Production Declines in May

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The FINANCIAL — U.S. industrial production declined in May, a sign weak global demand and a strong U.S. dollar continue to hold back output, according to Nasdaq.

Industrial production, which measures the output of U.S. manufacturers, utilities and mines, decreased a seasonally adjusted 0.2% from the prior month, the Federal Reserve said on June 15.

Capacity utilization, a measure of slack in the industrial sector, fell two-tenths of a percentage point to 78.1% in May. With the decline, capacity utilization is two percentage points below its long-run average recorded since 1972.

Economists surveyed by The Wall Street Journal had forecast a 0.2% increase in industrial production and a capacity utilization rate of 78.3%.

From a year earlier industrial production up was up 1.4 % in May. The April reading was revised to a 0.5% decline from a previously estimated 0.3% fall. Output figures for three of the four previous months were revised up to flat reading from declines, but the industrial production measure has failed to increase in six months.

A number of factors contributed to that easing, including a stronger U.S. dollar that makes U.S.-made goods more expensive overseas and an unusually cold winter that at times disrupted production and eased domestic demand.

The May decline in industrial production runs counter to recent hiring and consumer spending figures that suggest broader economy regained traction this spring.

Manufacturing output, which accounts for about three-quarters of overall industrial production, was fell 0.2% in May, following modest increases the prior two months. Manufacturing production is nearly unchanged from its January level, the Fed said.

Production of motor vehicles and parts rose 1.7% in May, but that gain was offset by weaker output in many other categories, including petroleum and coal products, food processing and aerospace.

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Mining output, the next-biggest component of industrial production, fell by 0.3%, the fifth straight monthly decline. The category is down 0.3% from a year earlier.

The decrease in mining resulted primarily from a drop in oil and gas well drilling and servicing, but it also reflected a decrease in nonmetallic mineral mining, the Fed said. An increase in crude oil extraction partially offset those declines.

The final component of industrial production, which measures utility output, rose by 0.2% in May, after large declines the prior two months. Utility output was up 1.3% from a year earlier.


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