U.S. Industrial Production Unexpectedly Declined in May -Update

By Paul Kiernan 

WASHINGTON -- U.S. industrial production ended three straight months of growth in May with an unexpected decline due in part to a fire at a major Ford Motor Co. supplier.

Industrial output, a measure of everything produced by the nation's factories, mines and utilities, slipped 0.1% in May from April in seasonally adjusted terms, the Federal Reserve said Friday. Economists surveyed by The Wall Street Journal had forecast a 0.2% increase.

The decline was led by a 0.7% fall in manufacturing output, "largely because truck assemblies were disrupted by a major fire at a parts supplier," the Fed said. Production of autos and light trucks fell to a seasonally adjusted annual rate of 10.18 million units in May from 11.28 million units in April.

The fire, which occurred May 2 at a parts plant in Michigan operated by a unit of China's Wanfeng Auto Holding Group, led Ford to idle production of flagship F-150 and Super Duty trucks for more than a week. Output has since resumed.

Economists brushed aside the weaker-than-expected result, noting that seasonal adjustments can be imperfect and survey-based measures of manufacturing conditions have continued to indicate improvement. Excluding motor vehicles and parts, U.S. manufacturing output declined by a more modest 0.2% from April.

"The May drop is nothing to be concerned over," said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients.

Manufacturing aside, U.S. industry continued to ramp up last month, underpinning an economy that many experts say is on track to post its fastest second-quarter growth in years. Consumers and businesses alike ratcheted up spending in April on the back of fiscal stimulus passed earlier this year and loose monetary policy.

Mining output rose 1.8% in May, the fourth straight month of gains, as oil and gas drilling rose to meet a jump in prices earlier this year.

Utilities production likewise rose 1.1% on sharply higher electricity generation. Last month was the warmest May on record, according to the National Oceanic and Atmospheric Administration, with above-average temperatures in all 48 contiguous states. That likely lifted electricity demand as consumers turned up the air conditioning.

Capacity utilization, a measure of industrial slack that measures production relative to industries' potential, declined by 0.2 percentage point last month from April to 77.9%. Economists had expected capacity utilization to be 78.1%.

Compared with May 2017, overall industrial production was up 3.5%.

"Looking at these data on a smoothed basis provides a picture consistent with all the other evidence depicting a stronger manufacturing sector," said Joshua Shapiro, chief U.S. economist at MFR, Inc., in a note to clients.

Write to Paul Kiernan at [e-mail]

(END) Dow Jones Newswires

June 15, 2018 12:04 ET (16:04 GMT)

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