Industrial Production Declines in May: Fed Blames a Fire at a Parts Supplier
Mike Mish Shedlock
Industrial Production edged down 0.1 percent in May after rising 0.9 percent in April.
Manufacturing production fell 0.7 percent in May, largely because truck assemblies were disrupted by a major fire at a parts supplier.
Excluding motor vehicles and parts, factory output moved down 0.2 percent.
The index for mining rose 1.8 percent, its fourth consecutive month of growth; the output of utilities moved up 1.1 percent.
At 107.3 percent of its 2012 average, total industrial production was 3.5 percent higher in May than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to 77.9 percent, a rate that is 1.9 percentage points below its long-run (1972–2017) average.
Revisions were a wash. The Fed revised March from +0.7% to +0.5% and April from +0.7% to +0.9%. February remains at +0.4%.
- The automotive products category within consumer goods, the transit equipment category within business equipment, and the consumer parts category within materials all posted large declines in May because of the lower output of motor vehicles and parts.
- Even excluding categories affected by the curtailment for motor vehicles, the indexes for consumer goods and for business equipment decreased 0.4 percent and 0.3 percent, respectively. A drop in the output of consumer energy products accounted for the bulk of the decline for non-automotive consumer goods, while a dip in the index for industrial and other equipment constituted most of the decline for business equipment.
- Construction supplies and business supplies both reported small gains, and the index for defense and space equipment increased for a fifth consecutive month. Despite the drop in the output of consumer parts, the overall index for materials advanced, supported largely by continued growth in energy materials.
- Manufacturing output moved down 0.7 percent in May but was 1.7 percent higher than its year-earlier level. The indexes for durables and for other manufacturing industries (publishing and logging) each fell more than 1 percent, while the production of nondurable manufacturing was little changed. Within durables, the drop of 6 1/2 percent for motor vehicles and parts was accompanied by decreases of more than 1 percent for primary metals and for electrical equipment, appliances, and components. Within nondurable manufacturing, all industry groups other than chemicals and printing posted declines.
- The output of mining rose in May for the fourth consecutive month and was more than 12 percent above its year-earlier level. The rise in the mining index in May reflected continued gains in the oil and gas sector. The index for utilities went up about 1 percent, as a gain for electric utilities outweighed a drop for gas utilities.
- Capacity utilization for manufacturing fell 0.6 percentage point to 75.3 percent in May, a rate that is 3.0 percentage points below its long-run average. The operating rate for durables decreased nearly 1 percentage point, and the rate for nondurables edged down. The utilization rate for mining jumped to 92.4 percent, which is about 5 1/2 percentage points higher than its long-run average. The rate for utilities rose about 1/2 percentage point but was still nearly 6 percentage points below its long-run average.
Blaming a fire appears a bit lame.
Question of the Day
The answer is "It doesn't".
And once again note actual industrial production vs all the stellar regions Fed reports for well over a year. Manufacturing is still well below the 2007 peak.
Mike "Mish" Shedlock