U.S. industrial output unexpectedly fell in May as manufacturing exports were hurt by a strong dollar and mining industries by the collapse in oil prices. It was the fourth negative month in the last five and the second in a row, so perhaps it was the prior optimism that was the real surprise.
Industrial production dropped 0.2 percent, well under the median prediction for a 0.2 percent gain, and the loss in April almost doubled upon revision to -0.5 percent from -0.3 percent reported the Federal Reserve today. Since there turn of the year on March has seen an increase in industrial production.
Manufacturing production also fell 0.2 percent this month, missing the 0.3 percent forecast, by a wide margin though April’s result was revised up to 0.1 percent from flat.
Mining output, which includes oil and gas exploration and production, sank 0.3 percent in May the fifth straight monthly drop. Energy exploration sank 7.9 percent after plunging 14.5 percent in April. Oil and gas production, however, climbed 0.5 percent in May, as existing wells were helped by nine percent rise in the barrel price of West Texas Intermediate from April to May.
Production of military hardware and of non-durable goods such as food and fuel also declined in May, while more standard factory activity, including autos, machinery and business equipment, maintained or rose slightly.
American factories have lost export orders as the has dollar climbed in value since last summer, while the plunge in oil prices has instigated this year’s 51.8 percent drop in mining production.
The percentage of the American industrial plant in use slipped to 78.1 percent (78.0553%) in May, from 78.3 percent (78.3036%) in April. It was the lowest level of use since January 2014 and 0.2 percent blow the forecast.
Chief Market Strategist
WorldWideMarkets Online Trading