Key facts
- US manufacturing production was flat in May, following four months of growth.
- Economists had predicted a 0.3% increase in manufacturing output for May.
- The Federal Reserve reported that factory output was unchanged in July.
- Overall industrial production decreased by 0.1% in July.
- Capacity utilization for the industrial sector fell to 77.5% in July.
US manufacturing output stalled in May, marking the first time this year that production has not advanced, according to Federal Reserve data. This follows four consecutive months of gains and falls short of economists' expectations for a 0.3% increase.
Further data indicated that US factory production was unchanged in July, suggesting a broader slowdown in the manufacturing sector. This stagnation is occurring amidst businesses navigating higher costs from import tariffs and potential supply chain disruptions linked to geopolitical events like the Iran war. Motor vehicle and parts output saw a 0.3% decline in July, while excluding this sector, factory output fell 0.1%.
Overall industrial production decreased by 0.1% in July, and capacity utilization for the industrial sector dropped to 77.5% from 77.7% in June. Economists suggest that tariffs on inputs like steel and aluminum could lead to extended summer shutdowns. Despite these challenges, there were solid increases in the production of electrical equipment, appliances, and components, as well as aerospace and furniture.
Separately, an analysis from the Joint Economic Committee – Minority indicated that the manufacturing industry lost 108,000 jobs during President Trump's first year, contradicting his promises of a manufacturing boom. This analysis suggests job losses were greater than previously estimated by the Bureau of Labor Statistics. Uncertainty from tariffs is cited as a factor that could derail the American manufacturing sector, potentially costing the U.S. over $490 billion in manufacturing investments by 2029.