US industrial output slips in May, but economists sanguine

Industrial production in the States undershot market forecasts in May, on the back of weakness in factory and utilities output.

Total industrial production was flat last month in comparison to April and ahead by 2.2% on the year, according to data from the Federal Reserve.

Economists had anticipated an increase of 0.1% on the month.

An estimated 0.4% increase in March industrial production was revised down to show a gain of just 0.1%, although April's rise was revised up by one tenth of a percentage point to 1.1%.

By market groups, production of consumer goods slowed noticeably in May, rising by just 0.2% on the month after a jump of 1.7% in the month before.

The business equipment category saw an even larger swing, with output down by 0.7% on the month after a rising 1.5% in April.

Production of non-industrial supplies, which includes construction, and materials also experience big swings in May.

Looking at the breakdown of activity by industry groups, mining output held up well, adding to April's 1.5% rise with a gain of 1.6%.

Manufacturing sector activity on the other hand gave back part of April 1.1% gain, slipping by 0.4%. To take note of, a prior estimate of a 0.4% drop in March was marked down to show a fall of 0.8%.

Capacity utilisation ran at 76.6% in May, down from 76.7% in April (consensus: 76.8%).

"The survey evidence still points to a rebound in manufacturing output. The Philly Fed and Empire state manufacturing indices released this morning painted a healthy picture of the manufacturing sector. A weighted average of the two rose in June and is consistent with manufacturing output accelerating to over 6%.

"We doubt output will rise that strongly in the months ahead, but with the global economic backdrop strong and the dollar weakening by over 7% since the beginning of the year, prospects for the US manufacturing still look brighter than they have been for some time," said Michael Pearce, US economist at Capital Economics.