- Millan Mulraine, deputy head of U.S. research & strategy at TD Securities USA
US industrial production dropped for a fifth straight month in April as mining and utilities output declined and manufacturing stagnated, according to the Federal Reserve. Total industrial output decreased 0.3% for the second month in a row. The March decline previously was estimated at 0.6%. Capacity utilization, an indicator of slack in the industrial sector, dropped four-tenths of a percentage point to 78.2% in April. Lower capacity utilization shows businesses hold off on investment and consumers refrain from big-ticket purchases, sapping economic growth. Economists now predict gross domestic product shrank by as much as 1% in the first quarter, and hopes for a spring rebound are waning. Overall industrial output in April was up just 1.9% from a year earlier. Meanwhile, a separate report showed US consumer sentiment unexpectedly declined in May. The Thomson Reuters/University of Michigan's flash May reading on the index came in at 88.6. It was down from the previous month's reading of 95.9 and missed expectations of a 96 reading. The drop in optimism about the economy was widespread among all age and income groups across the US. News that the world's number one economy faltered last quarter, coupled with uneven employment growth, shook households this month, fuelling concerns that spending will be slow to rebound. A strong Dollar and weak oil prices also are holding back manufacturing, further denting the possibility of a rapid bounce back in the rate of growth.
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