Industrial Production Didn't Expand In May/ Capacity Utilization Falls

Industrial production unexpectedly remained unchanged in May versus expectations for growth of +.2% MoM. In addition, capacity utilization fell to 81.3% from 81.5% in April, which was also revised lower from an 81.6% original estimate. In addition, the growth rate for April industrial production was scaled back to +.4% MoM, instead of +.7% MoM. Industrial production has risen 1.6% versus a year earlier.

It appears that manufacturers of autos (-.5% MoM) and other machinery scaled back production, and mild weather reduced utility demand (-1.3% MoM). Mining production did rebound though to rise +.5% MoM, on gains in coal and natural gas. Consumer goods production fell -.2%, mainly in durable goods, most likely in reaction to the slow down in retail spending.

Factory output accounts for about 80% of industrial production, and rose +.1% MoM. Manufacturing capacity utilization slipped to 79.9% in May, as capacity grew faster than output.

Today's data will put into doubt the rebound seen in other manufacturing measures, and may indicate a hesitancy to raise production when interest rates and fuel prices are rising.