The numbers: Industrial production rebounded 0.8% in May due to a strong gain in auto production, the Federal Reserve reported Tuesday.
The gain was above Wall Street expectations of a 0.5% gain, according to a survey by the Wall Street Journal. Output in April was revised down to a 0.1% gain from the prior estimate of 0.5%.
Production of motor vehicles and parts jumped 6.7% in May after a 5.7% drop in the prior month.
Capacity utilization rose to 75.2% in May, the highest rate since the pandemic struck last year. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities.
Big picture: The rebound in autos suggests that the shortage of semiconductors in the sector is less acute. But economists think that other shortages will hold back production this year.
What happened: Production at factories increased 0.9% in May, up from a revised 0.1% drop in the prior month. Excluding autos, manufacturing rose 0.5%.
Overall vehicle assemblies jumped about 1 million units to 9.9 million units on an annual rate, but they remained more than 1 million units below their average level in the second half of 2020.
Utilities output rose 0.2% in May after a 1.9% gain in the prior month. Mining output, which includes oil and natural gas, rose 1.2% after a 0.4% drop in April.
What are they saying? “Overall, recovery in industrial output, especially
manufacturing, is ongoing and is likely to be supported by demand for goods and low inventories. But supply chain bottlenecks are an ongoing headwind for now,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
Market reaction: Stocks
opened lower on Tuesday after another strong inflation report at the wholesale level.