The U.S. economy appears to be looking better, with news Friday that industrial production increased for the fifth month in a row during May while business inventories fell for the 15th straight month during April.

The Federal Reserve reported the total output at U.S. factories, mines and utilities increased 0.2% after being up a revised 0.3% in April. Capacity utilization increased 75.5% from 75.4% in April, the highest operating rate since September 2001. The largest portion of industrial output, factory production, also rose 0.2%
This increase in industrial production is consistent with 4% gross domestic product growth, says Newport Communications Senior Economist Jim Haughey.
“This is especially true when you consider that inventory reduction has been substituting for some production and that imports have grown unusually quickly as manufacturers are increasingly subcontracting to China to cut costs,” he says.
This string of five gains in industrial production is the longest since the nine months that ended in June 2000, just before manufacturing fell into a 18-month slump.
Haughey says the best news is that business equipment investment edged up 0.1% after declining more than 10% over the last year.
Industrial machinery production rose 1.7%, electrical machinery output was up 1.2% and semiconductor production gained 2.2%. "This is very early in the business cycle for a pickup in capital equipment production with capacity utilization at a 20-year low of 75.5%," Haughey says.
A separate report from the Commerce Department showed business inventories slipped another 0.2% in April to their lowest level since October 1999.
The inventory-sales ratio, which measures the time goods sit on shelves, fell to 1.35 months from 1.38 months in March.
Stockpiles at manufacturers, which account for about 40 percent of the total inventories, fell 0.2% during the month after falling 0.6% in March, while sales at manufacturers rose 2.4% in April after rising 1.1% in March.
This news comes as the National Association of Manufacturers released a forecast on Thursday in which they are predicting continued, but modest, economic growth. They see consumer spending increasing to between 2.5% to 2.9% in the second half of the year and the gross domestic product increasing to an almost 3% annual rate during the same period.