Summary
The scant 0.1% dip in manufacturing production says more about the cooling housing market than it does about the state of manufacturing. We are braced for an eventual slowing in factory activity, but this is not it. Utilities and mining output both rose.
Modest Production Pick-Up Despite Housing-Related Drag
U.S. industrial production rose half as much as expected in May, posting a 0.2% increase. The manufacturing category was down 0.1%. On the heels of our recent recession call, we are tempted to pile on with how this shows a weakening in manufacturing, but the fact of the matter is: this is actually a decent report. An upward revision lifted an initially reported increase of 1.1% in April to a 1.4% jump after revisions. That puts the level of output slightly above expectations. Durable goods production slowed 0.2% in May. The decline here was largely a function of wood products output, which fell 2.6% on the month. Appliance production also tracks with housing, and it too was down on the month. The residential construction space is already experiencing significant slowing in the wake of the Fed’s earlier rate hike and with mortgage rates jumping to their highest since 2008 this week, the space is likely to see further cuts. READ FULL ARTICLE>>