Europe's snowballing debt crisis threatens to send the global economy into recession.
Factory production shrank 0.4 percent last month, the Federal Reserve said on Friday. Total industrial output, covering factories, mines and utilities, declined 0.1 percent.
U.S. manufacturing output contracted in May for the second time in three months and a gauge of factory activity in New York state plunged this month, worrisome signs the American economy is cooling.
Within the Fed's report on U.S. industry in May, the softness in the factory sector was widespread. Output for durable - or long-lasting - goods dropped 0.5 percent as auto production slid 1.5 percent. Production for nondurables fell 0.2 percent.
Capacity utilization, a measure of how fully firms are using their resources, slipped to 79.0 percent in May from 79.2 in the prior month.
Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy - how far growth has room to run before it becomes inflationary.
Employment gauges also declined slightly, and indexes for the six-month outlook fell for the fifth consecutive month to 23.1, suggesting waning optimism about the medium-term.
The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.
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