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U.S. Industrial Production Rebounds Much Less Than Expected In May

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With a rebound in manufacturing output partly offset by sharp decreases in mining and utilities output, the Federal Reserve released a report on Tuesday showing U.S. industrial production increased by much less than expected in the month of May.

The Fed said industrial production jumped by 1.4 percent in May after plummeting by a downwardly revised 12.5 percent in April.

However, economists had expected industrial production to surge up by 2.9 percent compared to the 11.2 percent plunge originally reported for the previous month.

The rebound in industrial production came as manufacturing output spiked by 3.8 percent in May following a 15.5 percent nosedive in April.

Most major industries saw increases in output as many factories resumed at least partial operations following the coronavirus shutdowns, with the largest gain registered by motor vehicles and parts.

Meanwhile, the report said mining output tumbled by 6.8 percent in May after plunging by 6.1 percent in April, while utilities output slumped by 2.3 percent after inching up by 0.1 percent in the previous month.

"Overall, although production rebounded more slowly than retail sales in May, that is mostly because plants didn't reopen until mid-month or later," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "Supply chain issues could hold back production from reaching pre-pandemic levels any time soon but, if sales are recovering, production will eventually follow."

The Fed also said capacity utilization climbed to 64.8 percent in May from a downwardly revised 64.0 percent in April.

Economists had expected capacity utilization to jump to 66.9 percent from the 64.9 percent originally reported for the previous month.

While capacity utilization in the manufacturing sector rose to 62.2 percent in May from 60.0 percent in April, capacity utilization in the mining and utilities sectors dropped to 75.4 percent and 69.1 percent, respectively.

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