US industrial production likely improved in May as manufacturing sector strengthens

Energy Associated Press

The Federal Reserve releases May industrial production figures Monday at 9:15 a.m. Eastern.

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HIGHER OUTPUT: Economists forecast that industrial production rose 0.3 percent in May, after falling 0.3 percent in April, according to a survey by FactSet.

The increase would end two consecutive monthly declines. Cheaper oil prices over the past 10 months have cut into oil and gas drilling, as the cost of petroleum per barrel has nearly halved to $60 a barrel. Production in the mining sector — which includes oil wells — slipped 0.8 percent in April, the fourth straight decline.

The more important manufacturing sector was unchanged in April, after increasing 0.3 percent in March. Factory output has increased 2.3 percent in the past 12 months.

FACTORY REBOUNDS: Manufacturing has struggled since November, hurt by the cold weather, the stronger dollar and higher oil prices reducing equipment orders. But there are signs of a factory comeback that could help propel stronger growth through the rest of 2015.

U.S. manufacturing growth improved in May for the first time in six months, according to the Institute for Supply Management, a trade group of purchasing managers. Its index of manufacturing activity rose to 52.8 last month from 51.5 in April. That's the highest reading since February. Any reading above 50 signals expansion.

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More people are also buying autos. Cars and trucks sold last month at an annual pace of 17.8 million — the fastest monthly rate since 2005, according to industry analyst Autodata Corp. The greater demand could keep assembly lines humming at auto plants.

Several economists see stronger growth in the second quarter of the year, after the economy shrank at annual pace of 0.7 percent during the first three months.

Private forecaster Macroeconomic Advisers says that economic growth is tracking at an annual rate of 2.5 percent in the second quarter. The Atlanta branch of the Federal Reserve estimates that growth is running at 1.9 percent in the second quarter.