US factory production registers steepest slide since 2014

Manufacturing, makes up 75 per cent of total industrial production, accounts for about 12 per cent of the US economy

FILE PHOTO: A car hauler transports Chrysler vehicles to a holding lot from the FCA Jefferson North Assembly Plant in Detroit, Michigan, U.S. May 25, 2018.  REUTERS/Rebecca Cook/File Photo
Powered by automated translation

US 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 per cent (est. unchanged) after rising an upwardly revised 0.6 per cent
  • Total industrial production, which also includes mines and utilities, decreased 0.1 per cent (est. 0.2 per cent rise) after an upwardly revised 0.9 per cent gain
  • Capacity utilisation, measuring the amount of a plant that is in use, dipped down to 77.9 per cent (est. 78.1 per cent ) from 78.1 per cent

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 per cent following a 0.8 per cent gain the prior month.

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

Other recent reports have indicated factories are on steadier ground. US 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.


Read more:

Dollar at three-and-a-half-month high on elevated yields

US dollar strengthens as geopolitical risks ease


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 US 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 per cent from 75.9 per cent a month earlier and remains 3 percentage points below its long-run average.

Utility output rose 1.1 per cent after climbing 3.2 per cent the prior month

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