Industrial Output Advances Again in May

The U.S. manufacturing sector, hit hard by recession last year, remained on the comeback trail in May as industrial production rose for the fifth straight month, the Federal Reserve said on Friday.

In its monthly report on output, the Fed said production at factories, mines and utilities rose by 0.2 percent after rising a revised 0.3 percent in April. The Fed said businesses had slightly less equipment sitting idle, as capacity utilization edged up to 75.5 percent from 75.4 percent in April, the highest operating rate since September 2001.

Factory production, which makes up by far the largest portion of industrial output, also rose 0.2 percent. Factory capacity in use rose to 73.9 percent, its highest rate since August 2001.

The numbers were slightly weaker than Wall Street analysts polled by Reuters had anticipated. They had projected production to increase by 0.3 percent and capacity in use at 75.6 percent.

After falling in 11 of 12 months in 2001, the five straight consecutive gains in production show the manufacturing sector recovering along with the rest of the economy after a relatively mild recession that began in March 2001.

The factory sector still faces hurdles, as it continues to shed jobs, losing 19,000 workers in May, though the pace of layoffs has slowed, and it's still saddled with overcapacity. May's capacity use rate was more than 6 percentage points below the 1967-2001 average, the Fed said.

Even though the May report came in slightly softer than expected, some of the details were encouraging.

While some previous gains had been boosted by strong auto production, May's gain was made despite a slower pace at auto assembly lines. The Fed said production excluding cars and parts was up 0.3 percent as auto assemblies dipped to a 12.07 million annual rate from the 12.32 million annual pace in April.

Output of high-tech items, such as computers, communications equipment and semiconductors, rose 1.2 percent, its strongest gain since February's 3.2 percent advance.

Mining output rose 0.7 percent in May, while utilities production dipped 0.9 percent.