Published: Mon, June 18, 2018
Business | By Tara Barton

US industrial production fell 0.1 percent in May

US industrial production fell 0.1 percent in May

With a drop in manufacturing output more than offsetting jumps in mining and utilities output, the Federal Reserve released a report on Friday unexpectedly showing a modest decrease in USA industrial production in the month of May.

Economists polled by IFR Markets projected a 0.2% increase in industrial production and a 78.1% capacity utilization rate.

The decline was led by a 0.7% fall in manufacturing output, "largely because truck assemblies were disupted by a major fire at a parts supplier", the Fed said.

Today's data showed the US Industrial production fell 0.1% in May. Capacity utilization, measuring the amount of a plant that is in use, dipped to 77.9% from 78.1%.

The Fed's monthly data are volatile and often get revised.

Cranes and other construction equipment are seen at CONEXPO-CON/AGG convention at the Las Vegas Convention Center in Las Vegas, Nevada, U.S. March 9, 2017.

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Along with supply constraints that are pushing up materials prices, escalating concerns about tariffs pose a headwind to manufacturing.

Still, factory output has improved 1.7 percent over the past year and overall industrial production has increased 3.5 percent.

"The strong survey evidence suggests that the drop in manufacturing output in May was a blip, but the tariffs imposed on Chinese imports, if reciprocated, could weigh on the factory sector later this year", wrote Michael Pearce at Capital Economics. The tariffs prompted China to counter that it will retaliate with its own tariffs.

Trump has also announced steel and aluminum tariffs on USA allies such as Canada, Mexico and the European Union.

Meanwhile, mining output spiked by 1.8 percent in May after jumping by 1.0 percent in April, while utilities output surged up by 1.1 percent after soaring by 3.2 percent in the previous month. Mining output advanced 1.8 percent.

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