Industrial Production Fell a Wider-Than-Expected 0.8% in May

The report further raises hopes for aggressive monetary policy.
By TSC Staff ,

For the eighth-straight month,

industrial production and capacity contracted.

Industrial production fell 0.8% for the month, compared with expectations for a 0.4% drop. That puts it 3% below its level in May 2000. Manufacturing output declined 0.7%. Excluding motor vehicles and parts production, manufacturing dropped 0.9%; the sector has declined more than 4.25% since November 2000.

Capacity utilization came in at 77.4%, the lowest rate since August 1983, when it hit 77%. Economists had been expecting capacity utilization to fall to 78% from 78.5% in April.

The report further raises hopes for aggressive monetary policy. The

Federal Reserve next meets on June 26-27. Currently,

fed fund futures are pricing in a 100% chance of a 25-basis-point cut at that meeting and a 40% chance of a 50-basis-point cut. Since the beginning of the year, the Fed has cut rates five times and by 2.5 percentage points.

Meanwhile, April's industrial production figure was also revised downward to a 0.6% drop from the previous 0.3% estimate.

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