A worker assembles a midsize vehicle at a manufacturing plant in Canton, Mississippi. Photographer: Daniel Acker/Bloomberg.
U.S. industrial production fell in May for the second time in three months as utility output declined and manufacturers struggled for traction against a backdrop of cooler demand. The 0.2 percent decrease in production at factories, mines, and utilities followed a revised 0.1 percent gain a month earlier, Federal Reserve data showed today. The median estimate of Bloomberg survey of economists called for no change.
Manufacturing output edged up 0.1 percent, mostly due to a pickup in motor vehicle assemblies, after declining a month earlier by the most since October. However, production at utilities declined 2.9 percent, while mining and energy extraction was slightly higher.
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Evolving U.S. trade policy and tariff schedules have made it difficult for companies to assess both domestic and global demand conditions, clouding the short-term outlook for manufacturers. At the same time, a temporary agreement between the United States and China to de-escalate their trade war is helping temper some of the anxiety. President Donald Trump is seeking fairness in commerce and aiming for more foreign investment in the United States, stronger domestic production, and improved national industrial security. He also see import duties as a means to raise revenue for the government.
While a number of companies have announced longer-term plans for production facilities in the U.S., many have been cautious about upgrading operations as Congress debates the tax and spending bill.
The slight increase in May factory output reflected a nearly 5 percent advance in auto production, while aerospace equipment also climbed, according to the Fed. Motor vehicle assemblies increased to an annualized 11.19 million, the fastest in more than a year. Excluding motor vehicles, however, factory production dropped for a second month, on declines in machinery and fabricated metals. Production of consumer goods—which includes cars, appliances, and electronics—declined for a third straight month, while output of business equipment accelerated.
A separate report today showed retail sales fell for a second straight month in May, suggesting anxiety over tariffs and personal finances prompted consumers to pull back after an early-year spending rush.
Survey data have also indicated sluggish, yet stable, manufacturing activity. The Institute for Supply Management’s factory gauge has contracted in the past three months, while a New York Fed survey of state manufacturers showed activity shrank more than forecast in June.
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