U.S. Industrial Output Rebounded in May by Less Than Projected

(Bloomberg) -- U.S. industrial production rose by less than forecast in May after a record slump a month earlier, indicating a gradual recovery for manufacturing as coronavirus-related shutdowns continued to restrain demand.

Output at factories, mines and utilities increased 1.4% from the prior month after a revised 12.5% plunge in April that was the largest in records back to 1919, Federal Reserve data showed Tuesday. The median projection in a Bloomberg survey of economists called for a gain of 3%. Factory production rose 3.8% in May, compared with the median estimate for a 5% advance.

A separate report earlier Tuesday showed U.S. retail sales posted a record gain in May, regaining more ground than anticipated as states reopened economies.

The Fed data showed production is steadying as states reopen from months-long lockdowns that sent the economy into a deep recession. But even as restrictions lift, any recovery is likely to be slow as companies limit capital expenditures, while demand and trade remain tepid.

Industrial production in May was 15.4% below its pre-pandemic level in February. Capacity utilization, which measures the amount of a plant in use, increased to 64.8% from 64% in April; it was 76.8% in February.

The increase in factory output was led by motor vehicles and parts, which more than doubled from the prior month as plants reopened. Auto production was nonetheless down almost 63% from the same period last year.

The Fed’s report showed utility output decreased 2.3%, while mining dropped 6.8%. Oil and gas well drilling plunged 36.9%, as a decline in energy prices continued to weigh heavily on producers.

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