U.S. Manufacturing Output Fell in May by the Most Since 2014

Shobhana Chandra

15 Jun 2018, 09:45 PM IST

(Bloomberg) -- U.S. 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 Friday.

Highlights of Industrial Production (May)

Factory output fell 0.7% (est. unchanged) after rising an upwardly revised 0.6%
Total industrial production, which also includes mines and utilities, decreased 0.1% (est. 0.2% rise) after an upwardly revised 0.9% gain
Capacity utilization, 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 percent following a 0.8 percent gain the prior month.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy.

Other recent reports have indicated factories are on steadier ground. U.S. 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 U.S. 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 percent from 75.9 percent a month earlier, and remains 3 percentage points below its long-run average.

U.S. Manufacturing Output Fell in May by the Most Since 2014

Other Details

Utility output rose 1.1 percent after climbing 3.2 percent the prior month
Production of motor vehicles and parts decreased 6.5 percent after falling 2.2 percent the prior month; excluding autos and parts, total industrial output rose 0.3 percent
Mining production rose 1.8 percent; oil and gas well drilling increased 3.9 percent
Production of consumer goods fell 1 percent, and output of business equipment dropped 1.1 percent
Construction output rose 0.1 percent

--With assistance from Jordan Yadoo.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Randy Woods