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US Manufacturing Output Fell in May by the Most Since 2014

The pullback in factory output largely reflects a disruption in truck assemblies due to a major fire at a parts supplier.

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

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