U.S. factory output sluggish

U.S. factory production remained sluggish in May, suggesting manufacturers are growing cautious in the face of tepid global demand and equipment spending.

Manufacturing output advanced 0.1% from a month earlier but was still 0.3% lower than a year earlier, Federal Reserve data showed Thursday.

Total industrial production, which includes mining and utilities, fell 0.2% from April.

The details painted a mixed picture. Factory production increased for motor vehicles, aerospace equipment and appliances.

Output of consumer goods, including clothing and home electronics, and business equipment edged lower.

“The manufacturing sector is broadly flattish at best,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

The nation’s producers face a number of challenges, including softer demand for merchandise as households direct more of their income toward services and experiences.

Stricter lending standards and higher rates risk forcing some companies to tighten their belts on capital investment, while overseas customers are contending with muted economic growth.

That said, cooler demand for manufactured products, improving supply networks and easing commodity prices have all helped mollify input costs for producers.

Separate data on Thursday showed sustained consumer spending on merchandise in May, with retail sales rising 0.3% in a broad-based advance.

Despite the uptick in factory production, recent survey data suggest the sector is struggling to gain traction. The latest Institute for Supply Management report showed manufacturing activity shrank for a seventh month in May.

The Fed’s report showed capacity utilization at factories, a measure of potential output being used, held at 78.4%. Overall utilization eased to 79.6%.

Boeing supplier faces stoppage

Boeing’s largest supplier is racing to avoid a potentially crippling strike, a disruption that would jeopardize the U.S. planemaker’s effort to increase production of its cash-cow 737 jetliners.

Spirit AeroSystems is preparing to make a so-called best-and-final offer this week to about 6,000 unionized employees at its Wichita, Kansas, home base.

Members of the International Association of Machinists and Aerospace Workers plan a Wednesday vote on the proposal and, depending on the outcome, could go on strike at midnight on June 24.

The sides are at loggerheads over wages, mandatory overtime and a management plan to gut traditional health-care insurance, said Cornell Beard, president of IAM’s District 70, which represents IAM members across Kansas.

“The company is again telling us what a bad position they’re in,” Beard said in an interview. “Every time there’s a sacrifice to be made, we’re the ones to make it.”

From wire reportsA work stoppage could have far-reaching implications for Boeing and its European rival Airbus – also a customer of cash-strapped Spirit – at a time when their factories are straining to keep pace with soaring jet sales.

After 15 years of labor peace at aerospace manufacturers in the U.S., investors may be tuning out the risks of a strike, said Kristine Liwag, an analyst with Morgan Stanley.

“This labor agreement is a very large catalyst because the market assumes the contract talks will get settled,” Liwag said in an interview. “Is the market underpricing the risk?”

Spirit, carved out from Boeing in 2005, makes most of the 737 Max jet’s frame in Kansas and sends the fuselages 1,800 miles by rail to Seattle-area assembly lines.