The Federal Reserve said Wednesday that industrial output in the world's largest economy, including factories, mines and utilities, dropped by 0.4 percent in May, thus reversing a 0.6-percent gain a month earlier.

The May figure provided a potentially worrying sign that manufacturers in the US kept facing tremendous economic challenges.

The drop in output indicated that earlier assessments the US economy was turning around after a period of extremely weak performance might have been premature.

Volatile market environment

The Fed reported that sluggish growth abroad had dampened the demand for American-made goods, while lower energy prices caused a pullback on pipeline and equipment orders at many US factories.

Auto production was down 4.4 percent in May, while output also fell strongly in the electronics, furniture, clothing and chemical industries.

Mining production rose by 0.2 percent month-on-month, but remained down 11.5 percent from a year ago as lower energy prices slowed oil and gas drilling.

The Fed announced the latest output data just hours before a new rate policy announcement. Financial experts were not expecting a rate hike right now, pointing to weak job figures and the June 23 referendum in Britain on EU membership.

hg/jd (AP, Reuters)