U.S. factory output nearly stalls as sector struggles for traction

U.S. factory production remained sluggish in May, suggesting manufacturers are growing cautious in the face of tepid global demand and equipment spending.

Manufacturing output advanced 0.1% from a month earlier but was still 0.3% lower than a year earlier, Federal Reserve data showed Thursday. Total industrial production, which includes mining and utilities, fell 0.2% from April.

The details paint a mixed picture. Factory production increased for motor vehicles, aerospace equipment, and appliances. Output of consumer goods, including clothing and home electronics, and business equipment edged lower.

“The manufacturing sector is broadly flattish at best,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

The nation’s producers face a number of challenges including softer demand for merchandise as households direct more of their income toward services and experiences. Stricter lending standards and higher rates risk forcing some companies to tighten their belts on capital investment, while overseas customers are contending with muted economic growth.

That said, cooler demand for manufactured products, improving supply networks and easing commodity prices have all helped mollify input costs for producers.

Separate data on Thursday showed sustained consumer spending on merchandise in May, with retail sales rising 0.3% in a broad-based advance.

Despite the uptick in factory production, recent survey data suggest the sector is struggling to gain traction. The latest Institute for Supply Management report showed manufacturing activity shrank for a seventh month in May.

The Fed’s report showed capacity utilization at factories, a measure of potential output being used, held at 78.4%. Overall utilization eased to 79.6%.

Utility output dropped 1.8% for a second month. Mining fell 0.4%, reflecting a decline in oil and gas well drilling.