Industrial Production Rises 0.1% in May

In a sign that manufacturers may be gearing up for increased demand, the Federal Reserve reported Tuesday that industrial production rose 0.1% in May, the first increase since February.

Production at factories, mines and utilities had declined 0.6% in April, the Fed said. Work at factories, which accounts for almost 90% of industrial production, rose 0.2% last month after falling 0.7% in April.

This report is important to trucking because the manufacturing sector is one of the industry’s largest and most important customers.

In other economic news released Tuesday, the Labor Department said the consumer price index was unchanged in May and the Commerce Department reported housing starts rose 6.1%, a month after the lowest mortgage rates on record boosted sales.

The Fed said declines in auto production during May were offset by production gains for computer equipment, fabricated metal products and mineral products.

Manufacturing capacity use edged up to a level of 72.6% in May from April's 72.5%. In April, manufacturing capacity use reached its lowest level since May 1983.

Economists correctly predicted the 0.1% increase in industrial production, Bloomberg said.

Labor’s report showed an increase in consumer prices from April's 0.3% decline, suggesting that deflation does not appear to be affecting many consumer prices, analysts told the Associated Press. And the "core" rate of inflation, which excludes energy and food prices, rose by 0.3%, the largest increase since August.

Prices declined for clothing and energy products such as gasoline, but were offset by rising prices for medical care and lodging, Labor said.

Economists predicted the CPI would dip 0.1% and the core rate would rise 0.1%, Bloomberg said.

Many economists believe the Fed will cut interest rates, now at a 41-year low of 1.25%, at its next meeting later this month to ward off the threat of deflation, which is a period of falling prices.

The Fed has said the chance deflation taking hold of the U.S. economy is small, but it must ready to act.

Although falling prices could benefit consumers, for a producer it means more of a squeeze on profit margins.

Meanwhile, Commerce said builders broke ground on 1.732 million homes at an annual pace last month, up from a revised 1.632 million in April. Single-family home sales have risen in eight of the last nine months.

A rise in the number of homes being built increases current truck shipments of construction materials and will lead to increased demand for shipments of household appliances and furniture in the future.

New construction increased in the West, South and Midwest. Economists had forecast a 4.3% rise in May, Bloomberg said.

The number of building permits issued, a gauge of future construction, jumped 3.7% to a 1.788 million rate.