US industrial production stagnates while industrial production declines

Production at factories, mines and utilities remained unchanged after a downwardly revised 0.1% gain a month earlier, according to Federal Reserve data released Thursday (May 16).

Manufacturing production fell 0.3%, held back by motor vehicle production, after a downwardly revised 0.2% increase in March. Excluding automobiles, industrial production fell by only 0.1%. Mining has declined, largely due to a slowdown in coal mining, while utility output has recovered.

The manufacturing sector, which accounts for three-quarters of total industrial production, has struggled to gain momentum amid rising input prices and inconsistent demand. The Institute for Supply Management’s latest measure of factory activity returned to contraction territory in April after increasing a month earlier for the first time since 2022.

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The ISM’s latest half-year economic forecast, released Wednesday, shows that manufacturers expect average revenue growth of 2.1% this year, a downward revision from their December forecast. Input prices, which rose 1.6% through April, are expected to remain below 2% for the year.

U.S. producers also face sluggish export markets and higher borrowing costs that are dampening capital spending in the economy. Motor vehicle production fell 2%, following strong gains in the previous two months. Production also declined among producers of wood products, electrical equipment and machinery.

Production of professional equipment fell in four of the past five months, while production of consumer goods rose slightly and construction materials declined. Separate figures showed Thursday that housing starts rose less than expected.

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The Fed report shows that factory capacity utilization, a measure of potential output used, fell to 76.9%. The overall industrial utilization rate was little changed at 78.4%.

While factory customers have made progress over the past year to bring their inventories more in line with demand, government figures released Wednesday showed retail sales stagnated in April after downwardly revised gains during the previous two months.