WASHINGTON – United States factory output retreated in July after rising a month earlier by the most this year, signaling manufacturing is having trouble gaining momentum against a backdrop of lackluster global demand and a trade war with China.
The 0.4% decline in manufacturing output followed an upwardly revised 0.6% advance in the prior month, Federal Reserve data showed Thursday. The median estimate in a Bloomberg survey of economists called for a 0.3% July decrease.
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Total industrial production, which also includes mines and utilities, fell 0.2% last month, reflecting a temporary decline in Gulf Coast oil extraction tied to Hurricane Barry.
Key insights
- The Fed’s report, which showed a weakening in factory output for the fifth time this year, is the latest sign of fragility in the manufacturing sector as goods producers face the persistent headwinds of the U.S.-China trade war and tepid global demand. The latest escalation of U.S. trade tensions with China and renewed recession fears may further depress manufacturing output in the coming months.
- At the same time, a pair of reports earlier Thursday from the Federal Reserve banks of New York and Philadelphia showed gauges of manufacturing expanded in August more than projected
- Another report Thursday showed American consumers continue to spend, which will help support domestic manufacturing. U.S. retail sales surged 0.7% in July, the most in four months and led by broad gains across merchant categories, the Commerce Department reported
- The decline in July factory production was broad, including decreases in machinery, fabricated metals, electronic equipment, plastics and textiles
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- Capacity utilization, measuring the amount of a plant that is in use, dropped to 77.5%, the lowest since October 2017, from 77.8%
- Utility output increased 3.1% after falling 3.3% the prior month. Mining production fell 1.8%, with oil and gas well drilling slumping 3.3%
- Output of consumer goods rose 0.2% after a 0.4% advance, while business-equipment production dropped 0.4% as capital investment waned
- The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy
Reade Pickert is a reporter for Bloomberg News.
