US manufacturing output falls in June; rebounds in second quarter

economictimes.indiatimes.com:

motor vehicle output accelerated after two straight quarterly declines. Manufacturing output dropped 0.3% last month, the Federal Reserve said on Tuesday. Data for May was revised down to show production at factories falling 0.2% instead of edging up 0.1% as previously reported.

Economists polled by Reuters had forecast factory output would be unchanged. Production decreased 0.3% on a year-on-year basis in June. It rebounded at a 1.5% annualized rate in the second quarter after shrinking at a 0.2% pace in the January-March period.

Factory output, which had also contracted in the fourth quarter, was boosted by a 36.7% surge in the production of motor vehicles and parts in the second quarter. Manufacturing, which accounts for 11.1% of the economy, has been hamstrung by 500 basis points worth of interest rate increases from the Fed since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign in more than 40 years.

Spending is also shifting to services and away from goods, which are typically bought on credit. The Institute for Supply Management's measure of national factory activity has remained below the 50 threshold, which indicates contraction in manufacturing, for seven straight months. But there are flickers of hope.

The ISM survey this month showed customers viewed inventories as being «too low.» Private inventory investment rose at its slowest pace in 1-1/2 years in the first quarter. These developments bode well for future factory production. Motor vehicle output fell 3.0% last month after rising 0.8% in May.