U.S. Factory Output Drops in May, Second Fall in 3 months

By Jason Lange

U.S. manufacturing output contracted in May for the second time in three months, the latest worrisome sign the American economy could be cooling.

Factory production shrank 0.4% last month, the Federal Reserve said on Friday. Total industrial output, which includes output at factories, mines and utilities, declined 0.1%.

Analysts polled by Reuters had expected total industrial production to rise 0.1%.

The declines were widespread within the factory sector. Output for durable -- or long lasting -- goods dropped 0.5%. Production for nondurables fell 0.2%.

Utilities increased 0.8%.

Capacity utilization, a measure of how fully firms are using their resources, slipped to 79.0% in May.

Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy -- how far growth has room to run before it becomes inflationary.