Car sales were weak last month

Industrial output dropped 0.1% in May after April's 0.8% rise, the Federal Reserve reported.

Car production has been notably hit as high petrol costs have dented demand for sport utility vehicles.

The drop is the first since January, after manufacturing saw a recovery in the early part of the year.

A blip?

Monthly production of cars and car parts was 1.3% lower in May, after a less dramatic 0.2% drop in April.

General Motors saw its total sales fall by 16% in May while Ford suffered a 6% decline.

While May's fall was not predicted by analysts, they are wary about saying whether the latest figures signal a new trend.

"It is important to put this into context and realise what a strong number it followed in April, not come away convinced this is a new trend," said Dana Johnson, chief economist at Comerica.

Despite signals that the economy is slowing, economists feel that the Fed is more likely to raise interest rates than not.

That is due to concerns about growing inflationary pressures, fuelled by rising energy and property prices.