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Manufacturing, mining drag US industrial production

[WASHINGTON] US industrial production unexpectedly fell in May, likely as a strong dollar and energy spending cuts continued to weigh on manufacturing and mining output, bucking signs of an acceleration in the broader economy.

Industrial output fell 0.2 per cent after a revised 0.5 per cent drop in April, the Federal Reserve said on Monday.

The production side of the economy continues to struggle against the lingering effects of dollar strength and deep spending cuts in the energy sector in response to a sharp decline in crude oil prices.

Economists polled by Reuters had forecast industrial production rising 0.2 per cent last month after a previously reported 0.3 per cent fall in April.

Last month, manufacturing output slipped 0.2 per cent after gaining 0.1 per cent in April. Manufacturing continues to be hamstrung by a strong dollar, which has eroded profits of multinational corporations.

Mining production declined 0.3 per cent as oil and gas well drilling fell 7.9 per cent. Unseasonably warm weather in May lifted demand for air conditioning. Utilities production increased 0.2 per cent after dropping 3.7 per cent in April.

Industrial capacity use fell to 78.1 per cent last month from 78.3 per cent in April. Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.