US Industrial Output Rises More Than Forecast in Broad Advance

(Bloomberg) -- US industrial production increased in May, helped by a broad-based pickup in factory output in a positive sign for a manufacturing sector that has been struggling for momentum.

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The 0.9% increase in production at factories, mines and utilities followed no change a month earlier, Federal Reserve data showed Tuesday. The gain exceeded all forecasts in a Bloomberg survey of economists.

Manufacturing output also climbed 0.9%, led by consumer goods, after a revised 0.4% April decrease. Output at utilities jumped 1.6%.

The figures stand in contrast to other data showing manufacturing has had difficulty building momentum amid elevated input prices, inconsistent consumer demand and high borrowing costs. The Institute for Supply Management’s latest measure of factory activity shrank in May at a faster pace as a gauge of output came close to stagnating.

Separate figures earlier Tuesday showed retail sales barely rose in May and prior months were revised lower, suggesting greater financial strain among consumers.

“This is a favorable development for the industrial sector, but it’s tough to see it as the beginning of sustained strength, as the sector is strapped with headwinds that will limit the pace of recovery,” Wells Fargo & Co. economists Shannon Seery Grein and Tim Quinlan said in a note.

Manufacturing, which accounts for three-fourths of total industrial production, was helped by a 1.3% increase in the output of consumer goods. The gain was led by autos, appliances and chemicals.

Business equipment production climbed for the first time in three months, while output of construction supplies edged up.

The Fed’s report showed motor-vehicle production rose 0.6%. Output of machinery, metals, computers and wood products posted healthy advances.

The gain in overall industrial production was also helped by a pickup in mining output, notably oil and gas extraction.

Meanwhile, capacity utilization at factories, a measure of potential output being used, climbed to 77.1%. The overall industrial utilization rate rose to 78.7%.

--With assistance from Kristy Scheuble.

(Adds economists’ comment)

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