The nation's factories, mines and utilities in May operated at their lowest rate of capacity use in more than 17 years, the Federal Reserve said in its latest report on industrial production released on Friday.

Capacity utilization fell to 77.4 percent, the lowest level since August 1983, when it was at 77.0 percent, the Fed said.

Industrial production slipped 0.8 percent, its eighth consecutive monthly fall. Factory production, the largest component of overall industrial output, fell 0.7 percent in the month, driven lower by declines in most major categories. The fall in manufacturing came despite a slight upturn in auto and auto parts production.

The numbers underscore the fragility of the U.S. manufacturing sector, which has been shedding workers at a rapid pace during the current economic slowdown. Factory payrolls slipped by 124,000 in May.

In a survey by Reuters, analysts had projected production to fall by a smaller 0.4 percent and capacity use to fall to 78.0 percent.