Industrial production in the U.S. was unchanged in May as a drop in utility use offset gains in manufacturing and mining.
Last month’s output at factories, mines and utilities followed a revised 0.4% decrease in April that was smaller than previously reported, a Federal Reserve report showed today in Washington. The median forecast in a Bloomberg survey called for a 0.2% advance. Manufacturing, which makes up 75% of total production, increased 0.1% after falling 0.4%.
Business investment has eased as the economy navigates the effects of this year’s across-the-board U.S. government budget cuts and higher taxes. At the same time, the auto industry remains a bright spot for manufacturing, which has been hindered by a recession in Europe and a slowdown in China.
“U.S. CEOs remain cautious because of uncertainties regarding fiscal issues,” said Christophe Barraud, an economist at Market Securities-Kyte Group in Paris, who correctly forecast May industrial production. “Global demand is still weak. Industrial production should accelerate at the end of the third quarter, beginning of the fourth quarter, because the impact of the sequester will be limited.”
Stocks were little changed after the Standard & Poor’s 500 Index posted its second-biggest gain this year. The S&P 500 fell less than 0.1% to 1,635.85 at 9:57 a.m. in New York.
Estimates of the 85 economists surveyed by Bloomberg ranged from a drop of 0.4% to an increase of 0.7%. The prior month was previously reported as a 0.5% decrease. Manufacturing accounts for about 12% of the economy.
Output at utilities declined 1.8% after a 3.2% slump the previous month. Consumers have adjusted their thermostats after temperatures turned more seasonable following colder-than-normal readings in the first quarter.
“We’ve gone from a seasonally cool winter to what seems to be an unseasonably cold spring,” said John Ryding, chief economist at RDQ Economics in New York. “You don’t need to heat but you don’t need to power up your air conditioners either.”
Manufacturing increased in May for the first time in three months, helped by a gain in auto production. The output of motor vehicles and parts increased 0.7% after a 0.4% decrease a month earlier, today’s report showed. Manufacturing excluding cars and parts rose 0.1% after a decrease of 0.4%.
Auto sales are holding up. A report yesterday from the Commerce Department showed purchases at car dealerships climbed 1.8% in May, more than twice the 0.7% gain a month earlier. Cars and light trucks sold at a 15.2 million annualized rate in May, the sixth month out of the last seven to exceed the 15 million mark.
Assembly lines turned out 0.2% more business equipment in May and 0.1% less consumer goods. Production of computers and electronic products jumped 1.1% last month.
Machinery production decreased 0.4%, the third straight decline. Output of construction materials also dropped for a third month, falling 0.2% in May.
General Motors Co. is reinvesting about $8 billion a year to boost its global competitiveness, said Senior Vice President and Chief Financial Officer Dan Ammann.
“We continue to keep a close eye on the economic situation,” Ammann said at a June 12 conference. “There’s clearly been progress. But I don’t think it’s as strong as some of the asset prices and so on would cause you to believe.”
Capacity utilization, a measure of efficiency, eased to 77.6% from 77.7% the prior month, today’s Fed report showed.
Mining output, which includes oil drilling, rose 0.7% in May after a 1.1% increase, today figures showed.
China’s slowdown and the European recession have kept pressure on global manufacturers including DuPont Co. and Dow Chemical Co.
“Customers are cautious and the signals continue to be mixed,” said Howard Ungerleider, an executive vice president at Dow, based in Midland, Michigan.
“The good news is right here in the United States, where we do see improvements, although growth still remains at lower levels then we would like,” Ungerleider said at a June 12 conference. “Residential construction is up, but public budget tightening is limiting growth in the commercial sector. Our businesses last year really called for 2013 to be like 2012 and this is proving to be more right than wrong.”