Industrial Production in U.S. Probably Expanded at Slower Pace

Industrial production in the U.S. probably cooled in May as businesses trimmed investment plans and fewer motor vehicles rolled off assembly lines as sales slowed, economists said before a report today.

Output at factories, mines and utilities increased 0.1 percent after April’s 1.1 percent advance that was the biggest since December 2010, according to the median forecast of 79 economists surveyed by Bloomberg News. Another report may show manufacturing in the New York-region probably slowed this month.

Less factory production represents a pause in the industry that helped the world’s largest economy emerge from recession three years ago. Slumps in parts of Europe and a slowdown in Asia may temper demand for U.S.-made products at the same time companies limit purchases of new equipment.

“Manufacturing has been mediocre recently,” said Erik Johnson, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The sector isn’t off the charts, but, more broadly, it is outpacing much of the rest of the economy.”

The Federal Reserve releases the production data at 9:15 a.m. in Washington. Economists’ estimates ranged from a drop of 0.3 percent to an increase of 1.1 percent.

Other figures highlight manufacturing is cooling. A national factory barometer, the Institute for Supply Management’s index, fell in May after reaching a 10-month high in April. The index’s production gauge dropped, while its new orders measure advanced.

Empire State

The Federal Reserve Bank of New York’s general economic index, due at 8:30 a.m., probably declined to 13 in June from 17.1 the prior month, according to the median forecast. Readings greater than zero show expansion by manufacturers in the so- called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.

Job creation at factories has slowed as well. Weekly hours worked by manufacturing employees slid to 40.5 in May, the lowest in six months, Labor Department data show. The number of workers added to factory payrolls last month was three times less than the average in the first quarter.

Shares of manufacturers may be underperforming as a result. The Standard & Poor’s Supercomposite Machinery Index (S15MACH) has fallen 14 percent in the second quarter. That compares with a 5.6 percent drop in the broader S&P 500 Index in the same period.

Autos in May sold at a 13.73 million annual rate, down from 14.38 million in April and the slowest this year, according to data from Ward’s Automotive Group.

Beige Book

While car and truck sales retreated last month, a separate report from the Fed suggests auto manufacturing is holding up. Demand was strongest in vehicle and steel production, and manufacturing continued to expand, the central bank said in its Beige Book report on economic activity in its districts from early April to late May.

Recovery in the housing market, which has lagged behind the rest of economy, may also boost business at producers that service homebuilders.

“Spending time with homebuilders, suppliers of every single product that goes into a house, from asphalt shingles to installation, wood products, concrete, wiring, plumbing fixtures, there’s a sense of optimism in the homebuilding industry today that has lasted for more than a couple months,” Dan Fulton, the chief executive officer of timber company Weyerhaeuser Co. (WY), said during a June 13 investor conference “The market continues to feel like it’s got legs.”

Another report today is projected to show consumer sentiment declined in June. The Thomson Reuters/University of Michigan preliminary index of confidence dropped to 77.5 from a final May reading of 79.3, a four-year high, according to the Bloomberg survey median.

                      Bloomberg Survey

======================================================
                            Empire     Ind.  U of Mich
                             Manu.    Prod.    Conf.
                             Index     MOM%    Index
======================================================

Date of Release              06/15    06/15    06/15
Observation Period            June      May   June P
------------------------------------------------------
Median                        13.0     0.1%     77.5
Average                       12.3     0.1%     77.4
High Forecast                 16.1     1.1%     80.0
Low Forecast                   5.0    -0.3%     74.0
Number of Participants          53       79       66
Previous                      17.1     1.1%     79.3
------------------------------------------------------
4CAST                          5.0     0.0%     75.5
ABN Amro                      15.0     0.2%     78.0
Action Economics              15.0     0.0%     76.0
Ameriprise Financial          14.0     0.0%     78.0
Banca Aletti                  15.8    -0.1%     77.5
Bantleon Bank AG              14.0     0.2%     77.3
Barclays                      15.0     0.0%     76.5
BBVA                          13.0     0.2%     77.0
BMO Capital Markets           14.0    -0.1%     77.5
BNP Paribas                   13.5    -0.1%     77.0
BofA Merrill Lynch            10.0     1.1%     76.0
Briefing.com                  10.0     0.1%     77.0
Capital Economics             10.0     0.2%     79.0
CIBC World Markets            ---     -0.1%     ---
Citi                          ---      0.1%     78.0
ClearView Economics            5.0     0.2%     78.0
Commerzbank AG                10.0     0.1%     75.0
Credit Agricole CIB           14.0     0.1%     78.0
Credit Suisse                 ---      0.1%     75.0
Daiwa Securities America      ---      0.0%     77.0
DekaBank                      10.0     0.2%     77.0
Desjardins Group              10.0    -0.3%     77.0
Deutsche Bank Securities      10.0    -0.2%     78.0
Deutsche Postbank AG          ---      0.0%     ---
DZ Bank                       13.0     0.2%     77.3
Exane                         15.0     0.1%     78.0
Fact & Opinion Economics      12.0     0.0%     ---
First Trust Advisors          11.0     0.0%     78.0
FTN Financial                 ---     -0.1%     77.0
Goldman, Sachs & Co.          ---      0.2%     ---
Helaba                        14.0     0.3%     78.0
High Frequency Economics      ---      0.0%     74.0
HSBC Markets                  12.0     0.1%     77.8
Hugh Johnson Advisors         15.0     0.1%     77.0
IDEAglobal                    14.0     0.3%     77.0
IHS Global Insight            12.0    -0.1%     77.0
Informa Global Markets        ---      0.0%     77.5
ING Financial Markets         11.0     0.0%     76.4
Insight Economics             15.0    -0.2%     78.0
Intesa Sanpaulo               14.2    -0.1%     78.0
J.P. Morgan Chase              9.0     0.1%     77.0
Janney Montgomery Scott       ---      0.2%     ---
Jefferies & Co.                9.0     0.2%     78.0
John Hancock Financial        ---      0.3%     78.6
Landesbank Berlin             ---     -0.2%     77.0
Landesbank BW                 12.0     0.3%     77.0
Maria Fiorini Ramirez         ---     -0.1%     ---
Market Securities             ---     -0.1%     ---
MET Capital Advisors          ---      0.5%     ---
Mizuho Securities             15.0     0.0%     77.0
Moody’s Analytics             10.5     0.2%     76.5
Morgan Stanley & Co.          ---     -0.1%     ---
National Bank Financial       ---      0.1%     77.0
Natixis                       ---     -0.2%     77.5
Nomura Securities             10.8     0.3%     ---
Nord/LB                       13.0     0.0%     78.0
OSK Group/DMG                 ---      0.0%     77.8
O’Sullivan                    12.0     0.3%     78.0
Parthenon Group               16.1     0.0%     77.0
Pierpont Securities           ---     -0.2%     78.0
PineBridge Investments        11.0     0.3%     ---
PNC Bank                      ---     -0.2%     ---
Raiffeisenbank International  ---     -0.1%     77.0
Raymond James                 14.0     0.3%     78.8
RBC Capital Markets            8.0     0.1%     76.0
RBS Securities                ---     -0.1%     77.0
Scotiabank                    14.0     0.1%     77.8
Societe Generale              14.8    -0.1%     77.5
Standard Chartered            12.0     0.2%     77.5
Stone & McCarthy Research     10.8    -0.2%     78.5
TD Securities                 10.0     0.1%     79.0
UBS                           15.0     0.2%     77.0
UniCredit Research            ---     -0.2%     77.5
Union Investment              ---      0.6%     80.0
University of Maryland        14.0     0.1%     77.8
Wells Fargo & Co.             ---      0.1%     ---
WestLB AG                     14.0     0.1%     78.0
Westpac Banking Co.            8.0    -0.2%     77.5
Wrightson ICAP                15.0     0.2%     78.0
======================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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