U.S. Industrial Production Sees Modest Increase in May

U.S. industrial production experienced a slight uptick in May, as growth in high-tech, defense, mining, and durable goods manufacturing balanced out declines in non-durable goods and consumer products.

According to the Federal Reserve, industrial production rose by 0.1% in May, following a more substantial increase of 0.9% in April. Overall, production was up 1.7% from the same time last year.

This growth, however, fell short of analysts’ expectations of a 0.3% rise.

Manufacturing output remained unchanged after an upward revision of 0.7% in April. Yet, this stability concealed significant disparities within the sector. Durable goods manufacturing saw a gain of 0.8%, with nearly all major categories reporting increases, while non-durable goods manufacturing dipped 0.9%, as most categories faced downturns.

Notably, the strengths were primarily seen in sectors tied to business investments, AI infrastructure, and defense production. In May, production in computers and electronic products rose by 0.9%, which marked a substantial 10.3% increase from the same month last year. Semiconductor production saw a 2.4% increase over the month and climbed by 14.4% compared to May 2022. The Fed’s comprehensive tech industry total enhanced by 1.8% in May and 12.6% over the past year.

Growth in defense and space equipment production also rose by 0.9%, marking six months of consistent gains. Business equipment production increased by 0.6%, which is a 5.7% year-over-year lift, driven by a 1.9% rise in transportation equipment. Meanwhile, construction supplies grew by 1.1%.

Several sectors tied to data centers and industrial construction also recorded improvements. Prices for primary metals rose by 1.3%, processed metals by 0.8%, machinery by 0.2%, and electrical equipment and appliances by 0.5%.

On the downside, consumer goods faced notable weakness. Production dropped by 0.5% in May, with a 0.8% fall in non-durable goods overshadowing a 0.5% rise in durable goods. Household items, furniture, and carpets saw a decline of 1.0%, which was a significant decrease of 6.6% from the prior year. Other losses included a 3.0% drop in petroleum and coal products, 2.4% in textiles, 1.6% in the printing industry, and 0.8% in chemicals.

Mining production rose by 1.3%, aided by a notable 5.0% increase in oil and gas well drilling. However, utility output dropped by 0.4%, as a decline in electricity production outweighed an uptick in natural gas output.

Overall capacity utilization across industries climbed to 76.2%, though it remains 3.2 percentage points below the long-term average. Manufacturing capacity utilization was steady at 75.7%, which is 2.5 percentage points under the long-term average. In contrast, mining utilization improved to 86.5%, surpassing historical averages.

The data indicates that the manufacturing sector is increasingly driven by robust industries like chips, electronics, defense, transportation equipment, metals, machinery, and construction materials, while consumer-related and non-durable sectors lag behind.