BLBG: Industrial Production in U.S. Unchanged as Utility Use Drops
Industrial production in the U.S. was unchanged in May as a drop in utility use offset gains in manufacturing and mining.
Last month’s output at factories, mines and utilities followed a revised 0.4 percent decrease in April that was smaller than previously reported, a Federal Reserve report showed today in Washington. The median forecast in a Bloomberg survey called for a 0.2 percent advance. Manufacturing, which makes up 75 percent of total production, increased 0.1 percent after falling 0.4 percent.
Business investment has eased as the economy navigates the effects of this year’s across-the-board U.S. government budget cuts and higher taxes. At the same time, the auto industry remains a bright spot for manufacturing, which has been hindered by a recession in Europe and a slowdown in China.
“It’s partly the soft-global-growth story,” Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida, said before the report. “You’re seeing strength in things like autos. Everything else seems to be a bit spotty, and some of that is just softer consumer demand in general.”
Stock-index futures held losses after the report, with the contract on the Standard & Poor’s 500 Index maturing this month falling 0.1 percent to 1,628.7 at 9:18 a.m. in New York.
Estimates of the 85 economists surveyed by Bloomberg ranged from a drop of 0.4 percent to an increase of 0.7 percent. The prior month was previously reported as a 0.5 percent decrease. Manufacturing accounts for about 12 percent of the economy.
Utility Output
Output at utilities declined 1.8 percent after a 3.2 percent slump the previous month. Consumers have adjusted their thermostats after temperatures turned more seasonable following colder-than-normal readings in the first quarter.
“We’ve gone from a seasonally cool winter to what seems to be an unseasonably cold spring,” said John Ryding, chief economist at RDQ Economics in New York. “You don’t need to heat but you don’t need to power up your air conditioners either.”
Manufacturing increased in May for the first time in three months, helped by a gain in auto production. The output of motor vehicles and parts increased 0.7 percent after a 0.4 percent decrease a month earlier, today’s report showed. Manufacturing excluding cars and parts rose 0.1 percent after a decrease of 0.4 percent.
Vehicle Sales
Auto sales are holding up. A report yesterday from the Commerce Department showed purchases at car dealerships climbed 1.8 percent in May, more than twice the 0.7 percent gain a month earlier. Cars and light trucks sold at a 15.2 million annualized rate in May, the sixth month out of the last seven to exceed the 15 million mark.
Assembly lines turned out 0.2 percent more business equipment in May and 0.1 percent less consumer goods. Production of computers and electronic products jumped 1.1 percent last month.
Machinery production decreased 0.4 percent, the third straight decline. Output of construction materials also dropped for a third month, falling 0.2 percent in May.
General Motors Co. (GM) is reinvesting about $8 billion a year to boost its global competitiveness, said Senior Vice President and Chief Financial Officer Dan Ammann.
More Progress
“We continue to keep a close eye on the economic situation,” Ammann said at a June 12 conference. “There’s clearly been progress. But I don’t think it’s as strong as some of the asset prices and so on would cause you to believe.”
Capacity utilization, a measure of efficiency, eased to 77.6 percent from 77.7 percent the prior month, today’s Fed report showed.
Mining output, which includes oil drilling, rose 0.7 percent in May after a 1.1 percent increase, today figures showed.
China’s slowdown and the European recession have kept pressure on global manufacturers including DuPont Co. (DD) and Dow Chemical Co.
“Customers are cautious and the signals continue to be mixed,” said Howard Ungerleider, an executive vice president at Dow, based in Midland, Michigan.
“The good news is right here in the United States, where we do see improvements, although growth still remains at lower levels then we would like,” Ungerleider said at a June 12 conference. “Residential construction is up, but public budget tightening is limiting growth in the commercial sector. Our businesses last year really called for 2013 to be like 2012 and this is proving to be more right than wrong.”
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
