US: Industrial production slows, downside risk to Q2 equipment spending - Nomura

Analysts at Nomura point out that US industrial production fell 0.1% m-o-m in May, below expectations (Nomura: 0.1%, Consensus: 0.2%), following an upwardly revised 0.9% m-o-m increase in April.

Key Quotes

“The decline was driven by a sharp pullback in motor vehicle and parts production, but ex-auto manufacturing output was still soft, down 0.2% m-o-m.”

“A sharp 6.5% m-o-m decline in motor vehicle and parts production did not come as a surprise, considering incoming industry forecasts. However, the decline was amplified by a disruption to truck assemblies caused by a major fire at a parts supplier in early May.”

“The slowdown in ex-auto business equipment poses increased downside risk to Q2 equipment spending. On a y-o-y basis, the contribution of business equipment to total industrial output has slowed in recent months.”

“At the moment, we think this slowdown will likely be transitory. We remain optimistic on equipment spending beyond Q2.”