US industrial production falls 0.2 percent in May

As global demand weakens and strong dollar continues to pressure manufacturing, US industrial production falls unexpectedly

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

US industrial production fell in May, likely as a strong dollar and energy spending cuts continued to weigh on manufacturing and mining output, bucking signs of an acceleration in the broader economy.

Industrial output fell 0.2 percent after a revised 0.5 percent drop in April, the Federal Reserve said on Monday.

The production side of the economy continues to struggle against the lingering effects of dollar strength and deep spending cuts in the energy sector in response to a sharp decline in crude oil prices.

Economists polled by Reuters had forecast industrial production rising 0.2 percent last month after a previously reported 0.3 percent fall in April.

Last month, manufacturing output slipped 0.2 percent after gaining 0.1 percent in April. Manufacturing continues to be hamstrung by a strong dollar, which has eroded profits of multinational corporations.

Unseasonably warm weather in May lifted demand for air conditioning. Utilities production increased 0.2 percent after dropping 3.7 percent in April.

Industrial capacity use fell to 78.1 percent last month from 78.3 percent in April. Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.