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Industrial production unexpectedly falls in May

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Industrial production unexpectedly falls in May

More murky signs about US recovery.

According to a report from the Federal Reserve, US industrial output fell 0.2% in May.  This follows a 0.5% revised drop in April.

Analysts had expected an increase of 0.2%.

Most observers point to the continued strength of the US dollar, which tends to dampen exports, as well as the continued turmoil in the energy sector arising from sharp declines in the price of oil, as primary causes of the downturn in output.

The results provide yet another seemingly contradictory signal as to the strength of the US economy heading into Q3.  Labor markets appear relatively strong, consumer spending and producer prices are rising, suggesting an increasing growth rate for the remainder of the year.  However, the decline in output, the drop in manufacturing as reflected in today’s report on New York manufacturing from the New York Fed, and an increasing litany of downward revised growth rates for the remainder of the year from economists, make determining the outlook for growth difficult at best.

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