Economic Report: Big fire at auto-parts supplier drags down U.S. industri…

Economic Report: Big fire at auto-parts supplier drags down U.S. industri…

Fire at parts supplier for Ford trucks drags down U.S. industrial production in May

Bloomberg
American manufacturers are pumping out the goods as the economy begins its 10th year of expansion. Although industrial production fell in May, it’s up strongly over the past year.

The numbers: Industrial production fell in May for the first time in four months, but the drop-off was largely the result of a major fire at an auto-parts supplier for Ford F, -1.08% trucks instead any weakness in the U.S. economy.

Industrial production in the U.S. edged down by 0.1% last month, the Federal Reserve said Friday. Economists polled by MarketWatch has forecast a 0.1% increase.

What happened: Output in the manufacturing sector sank 0.7% mostly due to a a fire at a parts-supplier that wreaked havoc on the completion of truck assemblies. A plant in Eaton Rapids, Michigan was damaged last month by a large explosion, disrupting assembly lines for the Ford F-150 and vehicles produced by General Motors GM, -1.98% and Fiat Chrysler.

Yet even if cars and trucks are excluded, production was on the softer side. Output of consumer goods and business equipment outside the auto sector both fell, for example.

The declines likely reflect just a temporary dip, though, given the broad strength of the U.S. economy. Other measures of manufacturing are quite strong.

A few sectors stood out in May. The mining industry raised output by 1.8%, as higher oil and natural-gas prices encourage energy companies to drill for more fossil fuels. Mining output is up almost 13% over the past year.

In a bit of a surprise, utilities also increased production of electricity and natural gas used to heat and cool homes. Economists had predicted a decline.

By and large, the industrial sector is quite healthy. Production has climbed a solid 3.5% over the past year. And factories are plenty busy, too.

A measure known as capacity utilization that tracks whether factories are running at full tilt slipped to 77.9% from 78.1%. While that’s about 2 percentage points below the historic average, the rate of utilization is still near a three-year high.

Also Read: Why Trump is bashing Justin Trudeau and threatening trade ties between U.S. and Canada

Big picture: Businesses have raised production and investment over the past year and consumers are also spending more, putting the economy on track to grow more than 4% in the second quarter.

The good times aren’t about to end anytime soon, either. Hiring is strong, job openings are at a record high and the unemployment rate is at a nearly two-decade low of 3.8%.

The recent Trump tax cuts have also reduced the cost of investment for businesses and put more in Americans’ pockets.

Also Read: Are the Trump tax cuts encouraging Americans to splurge?

Market reaction: The Dow Jones Industrial Average DJIA, -0.10% and the S&P 500 SPX, +0.25% were set to fall sharply in Friday trades after President Trump said $50 billion in tariffs on Chinese goods would take effect. The 10-year Treasury yield TMUBMUSD10Y, -1.06% fell slightly to 2.93%.

Jeffry Bartash

Jeffry Bartash is a reporter for MarketWatch in Washington.

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  • U.S. Economy

  • Federal Reserve

  • Housing Indicators

  • Employment

  • Inflation

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