Key facts
- US manufacturing output was unchanged in May, missing economists' expectations for a 0.2% rise.
- This followed a revised 0.7% increase in April.
- Output of durable goods increased 0.8%, while non-durable goods production fell 0.9%.
- Total industrial production rose 0.1% in May.
- AI spending and business tax incentives are supporting the manufacturing sector.
U.S. factory production was unexpectedly unchanged in May, failing to meet economists' forecasts for a 0.2% increase. This flat reading followed a revised 0.7% jump in April. The Federal Reserve reported that while the output of durable goods, such as motor vehicles, increased by 0.8%, this strength was offset by a 0.9% decline in non-durable goods like food and textiles.
Overall industrial production edged up 0.1% in May, with mining output rising 1.3% and utilities decreasing 0.4%. Capacity utilization for total industry rose to 76.2%, which is 3.2 percentage points below its long-run average. Manufacturing capacity utilization remained unchanged at 75.7% according to the Federal Reserve's data.
Economists noted that businesses built up inventory in anticipation of shortages and higher prices due to geopolitical events, contributing to prior months' gains. However, an artificial intelligence spending boom and business tax incentives for equipment investment are providing a lifeline to manufacturing, offsetting drags from import tariffs and oil price shocks.