U.S. factory production was unchanged in July suggesting manufacturing activity was stalling as businesses navigate higher costs from import tariffs.
The unchanged reading in manufacturing output reported by the Federal Reserve on Friday followed an upwardly revised 0.3% increase in June.
Economists polled by Reuters had forecast production for the sector, which accounts for 10.2% of the economy, dipping 0.1% after a previously reported 0.1% gain in June. Production at factories increased 1.4% on a year-over-year basis in July.
Motor vehicle and parts output slipped 0.3% last month after falling 2.5% in June. Automobile manufacturers typically shut down production lines in July for the summer break as well as maintenance and retooling for new models. Excluding motor vehicles, factory output fell 0.1% after rising 0.5% in June.
“Tariffs on various inputs to production, in particular steel and aluminum inputs, could mean longer or more broad-based shutdowns this summer,” said Veronica Clark, an economist at Citigroup.
President Donald Trump has imposed a 50% duty on steel and aluminum as well as a 25% tax on motor vehicles and parts. Trump has defended the duties as necessary to revive a long-declining U.S. industrial base, though economists argue that cannot be accomplished in a short period of time, citing high production and labor costs as among the challenges.
There were solid increases in the production of electrical equipment, appliances and components, aerospace and miscellaneous transportation equipment as well as furniture and related products. But production of primary metals and machinery declined. Durable goods manufacturing production rose 0.3%.
Nondurable manufacturing output decreased 0.4%, with production falling across all categories.
Mining output fell 0.4% after easing 0.3% in the prior month. Utilities production slid 0.2%. That followed a 1.8% surge in June.
Overall industrial production fell 0.1% after rising 0.4% in June. Industrial output advanced 1.4% on a year-over-year basis.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, declined to 77.5% from 77.7% in June. It is 2.1 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector slipped to 76.8% from 76.9% in June. It is 1.4% percentage points below its long-run average.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
