WASHINGTON, June 15 (Reuters) - U.S. factory output fell unexpectedly in May on a broad decline in production, including the manufacturing of cars, casting a shadow over the economy's rebound from sluggishness at the start of the year.
The Federal Reserve said on Thursday manufacturing production dropped 0.4 percent last month, the second decline in three months. After downward revisions to data for prior months, factory output was lower in May than it was in February.
Analysts had expected factory output to rise a modest 0.1 percent.
But output fell across manufacturing industries, with motor vehicles and parts production dropping 2 percent and output for fabricated metal products down 0.7 percent. If not for a 1.1 percent surge in chemicals output, manufacturing would have fallen more.
Overall industrial production was flat last month, with a 1.6 percent increase in mining and a 0.4 percent gain in utilities countering the factory weakness.
Manufacturing, which accounts for about 12 percent of the U.S. economy, had been regaining ground as the prolonged drag from lower oil prices, a strong dollar and an inventory overhang faded.
But last month, manufacturing capacity utilization, which measures how fully factories are deploying their resources, fell 0.3 percentage point to 75.5 percent.
Overall industrial capacity utilization fell 0.1 percentage point to 76.6 percent.