Industrial Production, Capacity Utilization Rise More Than Expected in May, Fed Says

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Industrial production in the US rose more than expected last month, led higher by utilities, according to Federal Reserve data released on Friday.

The Fed said industrial production rose 0.4% in May following a revised 0.4% contraction in April. Econoday had expected a 0.2% gain

Utilities climbed 2.1% while manufacturing firmed 0.2%. Mining added 0.1%.

“As encouraging as this headline is, utilities were responsible for the beat,” BMO Capital Market said. “Excluding utilities, production was up 0.2%. Much like the retail sales report, this doesn’t change the overall picture or Fed expectations but at least it provides a little less pressure to act.”

Capacity utilization in May rose to 78.1% from 77.9% the month before, one basis point ahead of Econoday’s consensus.

Capacity utilization in the manufacturing sector rose one basis point to 75.7%, while capacity utilization in mining slipped to 91.3%, down three points.

“Manufacturing is still in trouble, thanks both to the trade war and the weakness of China’s cycle, but we think the worst is now over on both fronts,” Pantheon Macroeconomics said. “We expect no further tariffs to be applied to Chinese imports, and key leading indicators for China — notably the manufacturing PMIs and the rate of growth of the M1 money supply — are improving, despite the trade war.”

 
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