BUSINESS

US factory output up just 0.1 pct. in May after 2 months of declines, signalling more weakness.

06/14/2013 09:29 EDT | Updated 08/14/2013 05:12 EDT
WASHINGTON - U.S. factories barely increased their output in May after two months of declines, a sign that manufacturing is providing little support for the economy.

The Federal Reserve said Friday that factory production rose just 0.1 per cent in May from April. Output fell 0.4 per cent in April and 0.3 per cent in March.

Factories produced more autos, computers and wood products last month, offsetting declines in the production of primary metals such as steel and furniture.

Manufacturing output has risen just 1.7 per cent in the past 12 months.

Overall industrial production was flat in May after a 0.4 per cent drop in April. Utility output, which is heavily influenced by the weather, fell 1.8 per cent after a 3.2 per cent April drop. Mining output rose 0.7 per cent after a 1.1 per cent increase in April.

Manufacturing, the most critical component of industrial production, has struggled this year. Factories have been held back by weak economies overseas that are buying fewer U.S.-made goods. And American businesses have reduced their pace of investment in areas such as equipment and computer software.

The decline has held back hiring. Factories have slashed jobs in each of the past three months. And the Institute for Supply Management's manufacturing index fell in May to its lowest level since June 2009, the final month of the Great Recession.

Deep government spending cuts that began on March 1 may further reduce activity for some companies, particularly those in the defence industry.

And Europe, a key export market for the United States, remains stuck in recession. That has meant fewer purchases of U.S. goods. In the first three months of the year, U.S. exports to Europe fell 8 per cent compared with the same period a year ago

However, not all areas of manufacturing are facing troubles. Automakers are reporting solid sales. Ford Motor Co. said U.S. sales rose 14 per cent in May as demand for its F-Series pickup reached a six-year high. And Nissan's U.S. sales jumped 25 per cent compared with a year ago.

There are signs that manufacturing may pick up in coming months. U.S. factories saw orders increase in April after a steep drop in March.

And consumers have continued to increase their spending this year, despite higher taxes that have reduced their take-home pay. Retail sales increased 0.6 per cent in May, fueled by more purchases of cars and trucks, home improvements and sporting goods.