(June 15): US manufacturing production stalled in May after four months of gains, suggesting problems with supply chains disrupted by the Iran war and soaring costs may be starting to weigh on activity.
Factory output was little changed last month after an upwardly revised 0.7% advance in April, Federal Reserve data out Monday showed. The median estimate in a Bloomberg survey of economists called for a 0.3% advance.
Total industrial production, which also includes output of utilities and mining, rose 0.1%.
The report is somewhat at odds with signals from recent surveys, which have indicated a pickup in activity amid customer stockpiling induced by the war, rising defence-related orders and the ongoing data centre buildout. Monday’s figures may be a sign that surging costs are starting to bite after a separate report last week showed prices received by producers rose in May from a year earlier at the fastest pace since 2022.
Manufacturing excluding motor vehicles and parts was also flat in May, according to the Fed report. Mining output, which includes energy extraction, increased 1.3%. Utilities output fell.
The data showed a split between durable goods manufacturing, which continued to advance, and nondurable goods manufacturing, which declined. That decrease reflected a pullback in output for petroleum and coal products, plastics and rubber, and textiles.
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Production in categories exposed to the data-centre buildout, including computers and electronic products, electrical equipment, fabricated metals, machinery and primary metals, increased. Those industries have helped support factory activity even as shortages of inputs like memory chips and plastic resins are pressuring supply chains.
Production of defence and space equipment climbed for a sixth straight month to the highest level since December 2019. Economists see efforts to replenish munitions used in the war, as well as the potential for rising exports as part of recent trade deals, as one possible driver of growth this year.
Capacity utilisation at factories was little changed.
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Separate data Monday showed factory activity in New York state expanded only modestly in June after a strong advance in May. An index of future selling prices rose to the highest level since 2022, “suggesting that firms widely expect to raise their prices over the next six months”, according to the Federal Reserve Bank of New York report.
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