July 21, 2024

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US manufacturing production rose in May

US manufacturing production rose in May

WASHINGTON (Reuters) – U.S. factory production rose more than expected in May, reversing all of the decline recorded in the previous two months, but the momentum is unlikely to continue as interest rates rise and demand for goods declines.

The Federal Reserve said Tuesday that manufacturing output jumped 0.9% last month after a downwardly revised 0.4% decline in April. Economists polled by Reuters had expected factory production to rebound by 0.3% after a 0.3% decline in April. Production at factories fell in March and April. It rose 0.1% year-on-year in May.

Manufacturing, which represents 10.4% of the economy, has been hampered by high borrowing costs. A survey conducted by the Institute for Supply Management earlier this month found that “demand remains elusive as companies show an unwillingness to invest due to current monetary policy and other conditions.” “These investments include supplier order commitments, inventory builds and capital expenditures,” the Institute for Supply Management said. “.

Spending on goods fell in the first quarter for the first time in a year and a half. The Fed last week kept its benchmark overnight interest rate in a range of 5.25%-5.50%, where it has been since last July. US central bank officials have postponed the start of interest rate cuts, perhaps until late December, with policymakers expecting just one quarter-point cut for this year.

File photo: Startup Rivian Automotive's electric vehicle factory in normal mode

File photo: Startup Rivian Automotive’s electric vehicle factory in normal mode

Automotive and spare parts production rebounded 0.6% last month after falling 1.9% in April. Durable goods manufacturing output rose 0.6%. There were significant increases in the production of wood products, machinery, computer products, electronics as well as furniture and related products.

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Nondurable manufacturing output rose 1.1%, with a 1.5% decline in printing and support offset by strong gains elsewhere.

Mining production rose 0.3% after declining for two consecutive months. Utility production advanced 1.6% after rebounding 4.1% in the previous month. Overall industrial production accelerated by 0.9% in May. This came after an unchanged reading in April. Industrial production rose 0.4% year-on-year in May.

The industrial sector’s capacity utilization rate, a measure of how fully companies are using their resources, rose to 78.7% from 78.2% in April. It is 0.9 percentage points lower than the 1972-2023 average. The employment rate of the manufacturing sector rose to 77.1% from 76.6% in the previous month. It is 1.1 percentage points lower than its long-term average.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)