WASHINGTON – A drop in U.S. manufacturing output held back overall industrial production in May, an indication of uneven growth for the factory sector and only modest expansion for the overall economy.
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Industrial production -- a measure of output at factories, mines and utilities -- was unchanged from the prior month, the Federal Reserve said Thursday. Output in April climbed a revised 1.1%, up slightly from an initial estimate of 1%.
Economists surveyed by The Wall Street Journal had expected the index to rise 0.1% in May.
Manufacturing, the biggest component of industrial production, was the main drag last month. The index dropped 0.4%, partly retracing April's big gain. Manufacturing output had touched a postrecession high in April.
"Stepping back from the considerable short-term noise, the trend in core manufacturing output is rising modestly," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients. "Surveys points to continued increases in output, but no boom."
There were few bright spots in May. Auto production dropped 2%, while metals, wood products, appliances, computers, textiles and other sectors also retrenched.
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With May's setback, overall manufacturing output has increased 1.4% over the past 12 months.
U.S. factory activity was stagnant through much of 2016 but picked up earlier this year, in line with an improving global economy and rising optimism among U.S. businesses.
The Institute for Supply Management earlier this month said its closely watched index of U.S. manufacturing activity rose slightly in May. ISM manufacturing readings for each month this year have been higher than any month in 2015 or 2016.
Manufacturing has been shaping up as a bright spot for the economy this year. That stands in contrast to sluggish consumer spending and a widening trade deficit -- both economic headwinds. The economy has been stuck near a 2% annual growth rate during most of the nearly eight-year-old expansion.
Thursday's report showed output in the volatile mining sector rose 1.6% in May, pushing the index to the highest level since 2015. The mining index, which includes oil and natural gas extraction, was up 8.3% from a year earlier. The energy sector had been weighed down by weak commodity prices.
Utility output advanced 0.4% from the prior month. Utility use is typically more a reflection of the weather than the economy.
Overall capacity use, a measure of slack in the economy, decreased 0.1 percentage point to 76.6% in May. Economists had expected 76.7%.
Capacity use remains below the long-run average of 79.9%, a sign the economy is operating below its potential.
The Federal Reserve's report on industrial production can be found at:
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(END) Dow Jones Newswires
June 15, 2017 10:31 ET (14:31 GMT)