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US manufacturing output fell in May by the most since 2014

Jun 15 2018 15:39
Shobhana Chandra, Bloomberg

US 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 on 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 utilisation, 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 US economy.

Other recent reports have indicated factories are on steadier ground. US 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 US 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%.

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us  |  economy  |  manufacturing


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