US factory production fell in May by the most since January 2014, weighed down by fewer truck assemblies and still consistent with a steady outlook for manufacturing, Federal Reserve data showed Friday.
Industrial production slipped 0.1 percent compared to April, due largely to a 0.7 percent drop in the manufacturing sector - the biggest decline in more than four years, the report showed.
Motor vehicles and parts production fell 6.5 percent, which was attributed mostly to the fire that disrupted truck assemblies but it was the second straight month of falling output in the sector.
Total capacity in use in American industry declined by 0.2 percentage points to 77.9% (consensus: 78.2%).
The decline followed a revised 0.9% increase in April, first reported as a 0.5% gain.
Cranes and other construction equipment are seen at CONEXPO-CON/AGG convention at the Las Vegas Convention Center in Las Vegas, Nevada, U.S. March 9, 2017. At the same time, lower corporate and consumer taxes and a strong job market that's boosting household demand will underpin business investment in coming months, analysts said. At 107.3% of its 2012 average, total industrial production was 3.5% higher in May than it was a year earlier.
"The strong survey evidence suggests that the drop in manufacturing output in May was a blip, but the tariffs imposed on Chinese imports, if reciprocated, could weigh on the factory sector later this year", wrote Michael Pearce at Capital Economics. The dispute could lead to higher prices and harm US factories that depend on parts and raw metals from around the world, although Trump has said the moves will lead to a domestic manufacturing renaissance.
Meanwhile, mining output spiked by 1.8 percent in May after jumping by 1.0 percent in April, while utilities output surged up by 1.1 percent after soaring by 3.2 percent in the previous month. Economists polled by Econoday expected a reading of 19.1.