Industrial Production Drops 1.1%

June 16, 2009
Manufacturing output decreases 1%

Industrial production decreased 1.1% in May after having fallen a downward-revised 0.7% in April, the Federal Reserve reported on June 16.

Manufacturing output moved down 1% with broad-based declines across industries. The production of durable goods fell 1.8%. The largest decreases were in motor vehicles and parts and in machinery. Gains were recorded in primary metals, aerospace and miscellaneous transportation equipment, and miscellaneous manufacturing.

The production of nondurable goods edged down 0.2%. Gains in the output of food, beverages, and tobacco products; apparel and leather; and chemicals were offset by declines of more than 1% in textile and product mills, paper, and petroleum and coal products. Production in non-NAICS manufacturing, which consists of publishing and logging, decreased 0.6%.

"Despite some optimistic readings from purchasing managers and confidence indicators, the fact remains that manufacturing activity continues to decline," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. 'The rate of decline in industrial production is generally decelerating, but there just is not enough positive momentum at this point to offset the severe ongoing inventory liquidation.

"Motor vehicle production plummeted in May as GM and Chrysler virtually stopped production," he added. "Nevertheless, the May decline in production was widespread across most industries and reflects lower demand for many products as consumers deleverage and businesses adjusted to less demand. Unfortunately, this adjustment takes time. We expect a bottoming out of the industrial recession this summer and anticipate modest production gains in the fall."

The rate of capacity utilization for total industry declined further in May to 68.3%, a level 12.6 percentage points below its average for 1972-2008. Prior to the current recession, the low over the history of this series, which begins in 1967, was 70.9% in December 1982.

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