U.S. Industrial Production Fell 0.4% in May

A worker applying red-powder paint to components at a New Holland Ltd. factory in New Holland, Penn., on April 8. ENLARGE
A worker applying red-powder paint to components at a New Holland Ltd. factory in New Holland, Penn., on April 8. Photo: Luke Sharrett/Bloomberg News

WASHINGTON—U. S. industrial output declined last month amid a big drop in auto production, a reminder of the factory sector’s lackluster performance in recent months.

Industrial production, a measure of everything made by factories, mines and utilities, fell a seasonally adjusted 0.4% in May, the Federal Reserve said Wednesday. Economists surveyed by The Wall Street Journal had forecast a 0.3% decrease.

The move largely reflected a fall in output at auto factories and electric utilities.

Overall manufacturing output slid 0.4% in May, led by a 4.2% drop in production of motor vehicles and parts.

Utilities output was down 1.0% from the prior month.

Mining production rose 0.2%, the sector’s first increase since August 2015. The increase followed a rebound in coal mining while oil and gas extraction was little changed. The sector had been in free fall amid a nearly two-year drop in commodity prices, which led energy companies to slash investment.

Capacity use, a measure of how much industries are making as a share of potential output, fell 0.4 percentage point to 74.9%. The rate is 5.1 percentage points below the historical average, suggesting there is still ample slack across the economy.

Overall industrial production was down 1.4% in the 12 months through May. Manufacturing output is 0.1% below its year-ago level. Utility output is down 0.8% and mining output has plunged 11.5%.

Overall industrial production peaked in November 2014 but has failed to regain that level as the mining sector collapsed and manufacturing broadly leveled off.

Factories have been constrained by a strong dollar and weak overseas demand for many products. Autos had been a bright spot, and May’s decline could quickly be reversed.

The Fed report arrived as central bank policy makers weigh their next step for interest rates. A statement is due out at 2 p.m. Eastern Time, and Fed Chairwoman Janet Yellen is due to begin a press conference at 2:30 p.m.

Write to Jeffrey Sparshott at [email protected] and Anna Louie Sussman at [email protected]

WSJ.com: US Business

About The Author