Industrial production dropped 0.2 percent in May after two straight months of increases, according to May’s Federal Reserve Industrial Production and Capacity Utilization report.
The index for manufacturing increased 0.1 percent, following a gain of nearly 1 percent in April. May’s index was 0.3 percent below its year-earlier level. Powered by substantial gains in aerospace and miscellaneous transportation equipment, the index for durable manufacturing increased 0.3 percent. The index for motor vehicles and parts increased 0.2 percent in May after rising nearly 10 percent in April. Within nondurables, an increase of 1.7 percent in the index for petroleum and coal products was offset by declines in other industries.
The indexes for mining and utilities fell 0.4 and 1.8 percent, respectively, according to the Fed. Total industrial production, at 103 percent of its 2017 average, was 0.2 percent above its year-earlier mark. Capacity utilization dropped to 79.6 percent, 0.1 percent below its 50-year average. Manufacturing capacity utilization remained at 78.4 percent in May, 0.2 percentage points above its long-term average. The operating rate for mining dropped 0.3 percent to 92.2 percent, and the utilities operating rate fell 1.5 percentage points to 70.7 percent.
Mining output fell 0.4 percent in May due to decreases in coal mining and oil and gas well drilling. The output of utilities fell 1.8 percent for a second straight month as electric utilities fell in May. Natural gas utilities were unchanged.
“Major market groups posted mixed results in May,” the Fed stated. “Notable gains were recorded in the indexes for defense and space equipment (1.1 percent) and construction supplies (0.6 percent); most other major market groups recorded modest declines.”
According to the Federal Reserve Bank of Kansas City, regional manufacturing fell this month due to drops in both durable and non-durable goods, while expectations dropped into negative territory. The regional composite index, which tracks the average of the production, new orders, employment, supplier delivery times and raw materials inventories, fell 11 points to -12. Monthly price indexes fell significantly and are expected to continue to drop in the next six months.
“Month-over-month indexes remained mostly negative, but the pace of decline accelerated compared to May,” the report stated. “The production, volume of shipments, number of employees, supplier delivery time and inventories indexes all declined at a faster rate.”