Key facts
- U.S. factory production was unchanged in June.
- Manufacturing output grew at a 4.7% annualized rate in the second quarter, the fastest in five years.
- Overall industrial production increased 0.1% in June.
- Capacity utilization for the industrial sector remained at 76.1% in June.
- Output of semiconductors and related electronic components rose 0.5% in June.
U.S. factory production remained unchanged in June, according to data released by the Federal Reserve. However, manufacturing output experienced robust growth in the second quarter, expanding at a 4.7% annualized rate, marking the fastest pace in five years. This acceleration was attributed to increased business spending on artificial intelligence and inventory accumulation in anticipation of potential shortages and price hikes, influenced by the ongoing conflict in the Middle East.
Last month's flat reading followed a revised 0.1% gain in May. Economists had predicted a 0.1% increase for June. On a year-over-year basis, output rose 1.1% in June. The second-quarter growth rate of 4.7% contrasts with the 1.4% expansion seen in the first quarter.
Manufacturing, which constitutes approximately 9.4% of the U.S. economy, was supported by significant business investment in AI. Production of motor vehicles and parts increased by 0.7% in June. While output of computers and peripheral equipment fell 0.5% for the month, it saw a 9.2% year-on-year increase and grew at a 7.2% annualized rate in the second quarter. Communications equipment production also rose 0.7% in June and grew at a 9.6% rate last quarter.
Output of semiconductors and related electronic components increased by 0.5% in June and grew at a 10.2% annualized pace in the second quarter. Production of long-lasting manufactured goods saw a slight dip of 0.1% for the month, which was offset by a 0.2% gain in non-durable goods output.
In other sectors, mining production increased by 0.4% in June, following a 1.1% rise in May. Energy output grew by 0.5%, with oil and gas well drilling up 0.3%. Utilities production rebounded by 0.4% due to increased demand for air conditioning, recovering from a 0.7% drop in May.
Overall industrial production edged up 0.1% in June, matching the increase from May. Year-over-year, industrial output rose 1.1%. The second quarter saw industrial output grow at a 4.0% annualized rate.
Capacity utilization for the industrial sector remained unchanged at 76.1% in June, which is 3.3 percentage points below its long-run average. The operating rate for the manufacturing sector slightly decreased to 75.7% from 75.8% in May, and is 2.5 percentage points below its long-run average.