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

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US factoryBy 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%.

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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.
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