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U.S. Factories Cut Output For Second Time In Three Months

The Federal Reserve indicates that manufacturing, a key driver of the economic growth, is slowing.

WASHINGTON (AP) — U.S. factories produced less in May than April, as automakers cut back on output for the first time in six months. The report indicates that manufacturing, a key driver of the economic growth, is slowing.

The Federal Reserve said Friday that factory output declined 0.4 percent last month, after increasing 0.7 percent in April. Auto production fell 1.5 percent, the first drop since November. Auto sales rose sharply earlier this year but slowed in May.

Overall industrial production, which includes mines and utilities, dipped 0.1 percent, after a solid 1 percent rise in April. Both mines and utilities increased production.

Separately, a survey of manufacturers showed that factory activity in the New York region grew much more slowly in June than in May. The New York Federal Reserve Bank's Empire State index fell sharply to 2.3, from 17.1 in May. That means factories barely expanded this month. A reading below zero indicated contraction.

A measure of new orders in the Empire State survey also fell.

Consumers are spending less and businesses are purchasing fewer large capital goods, such as machinery and computers. That's reducing demand for factory goods.

Retail sales dipped in May for the second straight month, the government said Wednesday. It was the first back-to-back drop in two years.

And orders from businesses for machinery, computers and other capital equipment fell in April and March, according to a report released earlier this month.

The Institute for Supply Management, a trade group of purchasing managers, said manufacturing activity grew more slowly in May. Companies kept hiring, but not as quickly as in April.

Factories have been adding jobs at a healthy pace in the past two of years. But the sector isn't large enough to carry the whole economy.

Manufacturers added 12,000 jobs last month, the eighth straight gain. But overall, the economy generated only 69,000 jobs in May, the third straight month of sluggish hiring.

The economy grew at an annual rate of 1.9 percent in the January-March quarter. That's slower than the 3 percent growth in the October-December quarter.