US industrial output unexpectedly drops

washington — Factory production unexpectedly declined in May as the slump in energy output deepened.

The 0.2 per cent decrease at manufacturers followed a 0.1 per cent increase in April, figures from the Federal Reserve in Washington showed on Monday. Total industrial production, which also includes mines and utilities, also dropped 0.2 per cent.

Production of consumer energy products declined for a third consecutive month, exacerbating a decrease in other non-durable goods such as foods and chemicals that swamped continued gains among automakers. The sluggish data signal that a stronger dollar and decrease in fuel prices are still rippling through the economy, holding back American factories.

“The global economic situation is not ideal,” Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Connecticut, said before the report. As a result, “any growth that you see in manufacturing is going to be predominantly driven by domestic demand.”

Manufacturing, which makes up about 75 per cent of total production, was forecast to increase 0.3 per cent, according to the median forecast of economists surveyed by Bloomberg. April was previously reported as being unchanged.

Total industrial production was projected to rise 0.2 per cent, with estimates ranging from a drop of 0.3 per cent to a 0.6 per cent gain, according to the survey of 82 economists. April data were revised to show a 0.5 per cent drop compared with a previously reported 0.3 per cent decrease.

Capacity utilisation, which measures the amount of a plant that is in use, declined to 78.1 per cent in May from 78.3 per cent.

Mining production, including oil drilling, fell 0.3 per cent last month, the fifth consecutive decrease. Drilling and servicing at wells declined 7.9 per cent as companies seek to balance supply with demand amid a global oil glut.

Utility output increased 0.2 per cent in May after falling 3.7 per cent. Consumer goods production decreased 0.3 per cent last month, led by a 0.7 per cent drop for nondurable goods. Output of durable goods, those made to last at least three years, rose 1.1 per cent as makers of autos and electronics revved up.

Consumers’ appetites for new cars continue to support production. Output of motor vehicles and parts increased 1.7 per cent after rising 2 per cent a month earlier. Excluding autos and parts, factory production declined 0.3 per cent last month after being little changed in April.

“We expect that the US economic growth is regaining momentum in the second quarter,” Yong Yang, senior economist at Dearborn, Michigan-based Ford Motor Co, said on a June 2 sales call. “As the business environment for manufacturing has become more supportive in recent months, manufacturing activity will likely pick up.”