Goods production continued to expand in May and at a significantly faster rate than in April. A 1.2 percent monthly increase was the best performance since February, comfortably stronger than expected and enough to lift annual output growth from 2.6 percent to a very respectable 4.9 percent.
May's buoyancy was dominated by capital goods where production climbed fully 2.6 percent versus April when it dipped 0.2 percent. Consumer goods (1.4 percent) also had a good month but intermediates slipped 0.2 percent. Amongst the more volatile subsectors, energy jumped 2.9 percent but construction contracted 1.0 percent.
Today's data put average industrial production in April/May nearly 2 percent above its mean level in the first quarter. In the absence of a surprising large setback in June, the goods producing sector will have made a sizeable contribution to second quarter real GDP growth. Looking ahead, orders (see yesterday's calendar entry) have been especially volatile of late but, in general, manufacturing looks to be in good shape and output should continue to grow, albeit at a probably slower pace, through the current quarter.