U.S. industrial output dips in May as manufacturing declines

WASHINGTON, (Reuters) - U.S. industrial production fell slightly in May amid a sharp drop in manufacturing output, the Federal Reserve said on Friday.

Overall industrial output fell 0.1 percent last month after an upwardly revised 0.9 percent increase in April.

Economists polled by Reuters had forecast industrial production rising 0.2 percent. The U.S. central bank's measure of the industrial sector comprises manufacturing, mining, and electric and gas utilities.

May's decline was driven by a 0.7 percent fall in manufacturing, the largest monthly decline since January 2014, with the largest drops including a 6.5 percent fall in motor vehicles and parts and 2 percent decreases in primary metals and apparel. April's reading was upwardly revised to show a 0.6 percent gain.

Mining production was up 1.8 percent and utilities output rose 1.1 percent.

Overall manufacturing output rose at an annual rate of 1.7 percent through May, while the index for mining surged 12.6 percent on a 12-month basis and utilities rose 4 percent in that period.

With overall output falling in May, the percentage of industrial capacity in use fell 0.2 percentage points to 77.9 percent.

Fed officials have traditionally looked to capacity use as among the signals of possible higher inflation.

(Reporting by Howard Schneider; Editing by Paul Simao)