Industrial Output Dips as Factories Grapple With Weak Demand
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U.S. industrial production declined in July, restrained by tepid output among manufacturers pinched by cooler demand and shifting trade policy.
The 0.1% decrease in production at factories, mines and utilities followed an upwardly revised 0.4% gain a month earlier, Federal Reserve data showed Aug. 15. The median estimate of Bloomberg survey of economists called for no change.
Manufacturing output, which accounts for three-fourths of total industrial production, was unchanged after an upward revision to June. Mining and utility output both declined.
Manufacturing started the year strong after a rush of orders ahead of tariffs and a ramp-up in aircraft production following the end of a strike at Boeing Co. late last year. But output has since simmered down as companies dealt with the uncertainty related to President Donald Trump’s trade policy and a moderation in capital spending.
July : Total -0.1%, Mfg. +0.0%, Motor vehicles & parts -0.3%, Utilities -0.2%, Mining -0.4%; 77.5% — Federal Reserve (@federalreserve)
Producers are challenged by a number of headwinds, including uneven consumer spending, higher prices for some materials because of tariffs and ongoing trade negotiations with China and many other U.S. trading partners.
The tame July factory output figure reflected a decrease in nondurable manufacturing, including declines in textiles, apparel and petroleum, according to the Fed. Production of durable goods increased on motor vehicles and aerospace equipment.
By market group, production of consumer goods increased at a slower pace, while the output of construction and business supplies declined.
The Fed’s report showed capacity utilization at factories, a measure of potential output being used, eased to 76.8%. The overall industrial utilization rate also fell.
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A separate report Aug. 15 showed a solid increase in July retail sales after an upwardly revised gain a month earlier, suggesting firm consumer spending at the start of the third quarter that may help stabilize factory output.
Meanwhile, a survey of manufacturers in New York state showed activity expanded this month at the fastest pace since November as orders growth accelerated. At the same time, the outlook for business conditions eased and capital spending plans softened.
Other reports have indicated sluggishness. The Institute for Supply Management’s measure of factory activity has been in contraction territory from March through July, and the manufacturing sector has lost 37,000 jobs since April.
