Industrial production was flat in May, two-tenths below the consensus forecast. The downside surprise largely reflected a 1.8% drop in the utilities component. Manufacturing output rose 0.1%, in line with forecast. Solid gains in vehicles (0.7%) and computer and electronics (1.1%) were offset partly by declines in machinery (-0.4%) and food and beverage (-0.4%). In aggregate, durable goods output rose 0.2% and non-durables 0.1%. The modest gain in May reflects only a partial rebound from the 0.4% decline in April. As a result, the trend has clearly weakened – on a three-month-on-three-month basis, manufacturing declined by an annualized 0.4% in May. This is consistent with consensus view that economic growth is in the process of slowing during Q2, although retail sales data suggest that consumer spending has proved more resilient than production.