Industrial production in the U.S. unexpectedly saw further downside in the month of June, according to a report released by the Federal Reserve on Tuesday.
The Fed said industrial production slid by 0.5 percent in June, matching the downwardly revised decrease in May. Economists had expected production to come in unchanged compared to the 0.2 percent dip originally reported for the previous month.
The unexpected decline in production was partly due to a continued slump in utilities output, which plunged by 2.6 percent in June after tumbling by 1.5 percent in May.
Manufacturing output also fell by 0.3 percent in June after slipping by 0.2 percent in May, while mining output edged down by 0.2 percent in June after slumping by 1.4 percent in May.
“We know that the ISM has been in contraction territory for the past eight months and we know that the Baker Hughes oil and gas rig count has fallen heftily over the past three months,” said ING Chief International Economist James Knightley. “Given this, we aren’t expecting an imminent rebound in output from the manufacturing or mining sectors.”
He added, “July utility output will be up sharply though, with AC units in overdrive, and this is the only hope for a positive number for industrial activity.”
The report also said capacity utilization in the industrial sector declined to 78.9 percent in June from a downwardly revised 79.4 percent in May.
Economists had expected capacity utilization to edge down to 79.5 percent from the 79.6 percent originally reported for the previous month.
Capacity utilization in the utilities sector slid to 68.5 percent, while capacity utilization in the manufacturing and mining sectors dipped to 78.0 percent and 91.6 percent, respectively.
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