Today’s data showed the US Industrial production fell 0.1% in May. According to analysts at Wells Fargo the slide was largely due to a 0.7% decline in manufacturing output. They explained that a fire at a parts supplier played a role, but there was some weakness that the fire does not explain.
Key Quotes:
“Manufacturing comprises roughly three quarters of all industrial production, so what happens for manufacturing will determine what happens for the broader index, and what happened in May was not good. According to the official release from the Federal Reserve, manufacturing output fell 0.7 percent “largely because truck assemblies were disrupted by a major fire at a parts supplier.” It would be an oversimplification, however, to suggest that the weakness was all fire-related.”
“On an industry basis, durable manufacturing output was down, as you might expect given a 6.5 percent drop in motor vehicles and parts. But nondurable manufacturing also fell in May with declines in six out of eight sub-sectors.”
“Even after accounting for the fire’s effects, the weakness in today’s report does not square with our expectations for convergence between the hard data and the surveys. For now we will take some comfort in the notion that “one month does not a trend make.”
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