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First Cut: Mild rebound in May industrial production doesn’t change that activity is weak overall

Industrial production staged a mild rebound in May, rising 1.4% after falling 12.5% (previously down 11.2%) in April and -4.6% (previously down 4.5%) in March. The increase was due to a 3.8% increase for manufacturing that more than offset declines of 6.8% in mining and 2.3% in utilities. The Federal Reserve noted, “Manufacturing output rose 3.8 percent in May, but it was still 16.9 percent below its pre-pandemic level in February.”

The increase in manufacturing was mainly due to its durable component which rose 5.8% in May, which in turn was powered by a 120.8% rebound in motor vehicles and parts after two months of sharp declines of 76.5% in April and 30.0% in March. Excluding motor vehicles and parts, overall production was flat in May.

Manufacturing excluding motor vehicles and parts was up 2.0% month-over-month.
Mining was restrained by ongoing weakness in energy despite some recovery in oil prices. Oil and gas well drilling was down 36.9% in May after down 27.8% in April.

Cool weather in May for many parts of the US restrained utilities output in spite of renewed activity in some manufacturing. Electrical output was down 1.1% and natural gas was down 8.1%.

Capacity utilization in May remained below recent peaks. It was not greatly increased at 64.8% in May after 64.0% in April which was a sharp decline from the 73.2% in March. Manufacturing capacity use was a bit firmer at 62.2% in May from 60.0% in the prior month, but mining capacity continued to decline at 75.4% in May, well below the near term peak of 20.2% in January just before the pandemic began to have more than isolated impacts on activity. Utilities capacity continued to operate at about the same level at 69.1% in May after 70.9% in April.

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