In­dus­trial out­put drops 0.2% in May

The strong dol­lar and lower oil prices take a toll on a key sec­tor in the na­tion’s econ­omy.

Los Angeles Times - - TECHNOLOGY - By Jim Puz­zanghera jim.puz­zanghera@latimes.com

WASHINGTON — In­dus­trial out­put fell in May, the sixth straight month with­out an in­crease as a strong dol­lar and lower oil prices con­tin­ued to take a toll on a key sec­tor in the na­tion’s econ­omy.

An­a­lysts had been ex­pect­ing a small in­crease as oil prices have sta­bi­lized. But pro­duc­tion de­clined 0.2%, the Fed­eral Re­serve said Mon­day.

The strug­gles at the na­tion’s fac­to­ries, mines and util­i­ties will be one of the fac­tors that Fed pol­i­cy­mak­ers are likely to con­sider when they meet Tues­day and Wed­nes­day.

The of­fi­cials must de­cide if the econ­omy is strong enough for the first hike in the cen­tral bank’s bench­mark short-term in­ter­est rate since 2006.

For the 12-month pe­riod that ended May 31, in­dus­trial pro­duc­tion was up 1.4%. The an­nual pace had been 1.9% through April 30.

Gus Faucher, se­nior macroe­conomist at PNC Fi­nan­cial Ser­vices group, called the re­port dis­ap­point­ing.

“Auto sales were very strong for the month,” he said. “But lack­lus­ter re­sults in other ar­eas held back pro­duc­tion.

“The stronger dol­lar is a drag, as it makes ex­ports from the U.S. more ex­pen­sive and im­ports to the U.S. less ex­pen­sive. And energy pro­duc­tion con­tin­ues to de­cline.”

The May de­cline was an im­prove­ment over a 0.5% drop in April that was re­vised down from an ear­lier es­ti­mate of 0.3%.

The min­ing sec­tor, which in­cludes oil and gas well drilling and ser­vic­ing, im­proved last month. Min­ing pro­duc­tion was down 0.3% in May com­pared with a 1.3% de­crease the pre­vi­ous month.

But man­u­fac­tur­ing out­put fell 0.2% in May, the first de­cline in three months de­spite a 1.7% in­crease in auto pro­duc­tion.

Fac­to­ries pro­duc­ing petroleum and coal prod­ucts had a 1.6% drop in out­put in May, de­fense and space pro­duc­tion fell 1.3% and food, bev­er­age and to­bacco was down 0.9%.

Ca­pac­ity uti­liza­tion, which mea­sures slack in the in­dus­trial sec­tor, de­clined 0.2 per­cent­age points in May to 78.1%. The fig­ure was 2 per­cent­age points be­low its av­er­age since 1972.

Paul Sakuma As­so­ci­ated Press

A TANKER TRUCK passes the Chevron oil re­fin­ery in Rich­mond, Calif. A de­cline in re­fin­ing con­trib­uted to the 0.2% drop in in­dus­trial out­put in May.

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