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June 15 (UPI) — According to a report from the Federal Reserve, industrial production in the U.S. economy decreased in May, indicating a slowdown in the world’s largest economy due to higher lending rates after two consecutive months of growth.
In the fourth quarter, industrial activity accounted for around 11% of the total U.S. gross domestic product, based on the latest data available from the Fed.
Data from the Federal Reserve showed that industrial production declined 0.2% in May compared to the previous month. In April, activity had expanded by 0.5%.
The Fed stated that data across all industrial groups were mixed in May. While aerospace and defense activity grew by 1.1% and construction supply increased by 0.6%, overall activity remained sluggish with only a 0.1% growth from April levels. The May index was 0.3% lower than the same period last year.
The mining sector saw a 0.4% contraction in May, primarily driven by a decline in coal mining and oil and gas drilling. As more renewable energy sources are integrated into the grid, coal is gradually fading from the U.S. energy landscape.
The Fed’s report added, “Within business equipment, an increase of 2.1% in the transit component was more than offset by decreases of 0.75% in both the information processing and the industrial and other components.”
The slowdown in industrial activity reflects similar trends in other sectors of the U.S. economy. Although the S&P 500 recently reached levels 20% higher than in October 2022, signaling the start of a bull market, mortgage applications have hit a 30-year low due to successive rate hikes from the Federal Reserve, making borrowing more challenging.
After deciding to keep rates unchanged, the Fed forecasted sluggish GDP growth, projecting an expansion of only 1.8% by 2025.
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