The Federal Reserve said that manufacturing production fell for the second time in the past three months, down 0.4 percent in May. After rebounding strongly in April, up 1.1 percent, this latest figure is a bit of a disappointment, suggesting a softening of activity following recent progress. Motor vehicles and parts production led the decline in May, down 2.0 percent for the month and off 1.5 percent year to date, as automotive demand has continued to be weaker than desired so far in 2017. Despite the easing in this latest release and some lingering challenges, the underlying data remain consistent with a manufacturing sector that has turned a corner and has moved in the right direction, especially relative to where it stood at this point last year.
Manufacturing production has risen 1.4 percent over the past 12 months, down from 1.6 percent in the previous report. Yet, it was the seventh consecutive positive year-over-year reading for manufacturing output and definite progress from the 0.3 percent year-over-year decline in May 2016. Similarly, manufacturing capacity utilization declined from 75.8 percent in April to 75.5 percent in May. For comparison purposes, utilization in the sector was 75.0 percent one year ago.
Digging into the underlying data, nondurable goods production edged up 0.1 percent in May, but durable goods output fell 0.8 percent. Beyond automotive, the largest declines included miscellaneous durable goods (down 2.1 percent), textile and product mills (down 1.8 percent), electrical equipment and appliances (down 1.6 percent), wood products (down 1.4 percent), printing and support (down 1.2 percent), fabricated metal products (down 0.7 percent) and paper (down 0.7 percent), among other sectors. In contrast, higher production levels included chemicals (up 1.1 percent), apparel and leather (up 0.7 percent) and machinery (up 0.1 percent).
Meanwhile, total industrial production was flat in May, slowing from its fastest monthly gain in more than three years in April (up 1.1 percent). Manufacturing output was the main drag on industrial production growth for the month, with mining and utilities production up 1.6 percent and 0.4 percent, respectively. Over the past 12 months, industrial production has risen 2.2 percent, its best reading since January 2015. The year-over-year pace was also a definite improvement from the 1.7 percent year-over-year decline in May 2016. Mining and utilities production grew 8.3 percent and 0.1 percent year-over-year in this release. At the same time, capacity utilization decreased from 76.7 percent—a 20-month high—to 76.6 percent.
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