U.S. manufacturing output dipped sequentially in July on an inflation-adjusted basis, according to the Federal Reserve’s latest report on industrial …Continue reading →
U.S. manufacturing output dipped sequentially in July on an inflation-adjusted basis, according to the Federal Reserve’s latest report on industrial production. The 0.04 percent decrease was the first since April’s 0.43 percent decline.
So does that mean that President Trump’s tariff-heavy trade policies are finally starting to undermine the nation’s trade-heavy manufacturing sector? That’s not what the evidence over time seems to be saying.
This morning’s release shows that revisions for the last two months were mixed. June’s initially estimated 0.12 percent improvement was upgraded to one of an OK 0.28 percent. May’s originally upgraded 0.31 percent advance was revised down to one of 0.22 percent.
And check out the year-to-date figures for the second Trump administration so far, and the comparable stretch under the pre-tariff-y Biden administration. Since February (the first full month of Trump 2.0), real manufacturing output is up 0.67 percent. Over the same period last year, it was down 0.49 percent.
Moreover, on a year-on-year basis, manufacturing has grown by 1.61 percent in after-inflation terms. Between the previous, Biden-y Julys, it shrank by 0.58 percent. Good luck finding the tariff-mageddon message being sent by these results.
The biggest July price-adjusted output winners among the major industry sub-categories tracked by the Fed were:
>Miscellaneous durables manufacturing – a catch-all grouping containing everything from toys and sporting goods to various types of medical supplies – which boosted its real output by 1.29 percent, its first monthly rise since March and the biggest since last October’s 1.64 percent;
>The big electrical equipment, appliance, and component sector, where a 1.01 percent rise in price-adjusted output followed a downwardly revised June 3.10 percent nosedive that was the category’s biggest since the 6.25 percent cratering in April, 2020, during the worst of the pandemic;
>The import-heavy furniture and related product manufacturing sector, whose 0.97 percent sequential real production advance was its fourth straight increase – the best such stretch since the seven-month span between August, 2021 and March, 2022. But inflation-adjusted production among these businesses is still down 0.20 percent year on year.
>Wood products manufacturing, whose after-inflation output in July was 0.66 percent greater than its June level.
The biggest July losers among these broad manufacturing groupings were:
>The import battered textiles and products manufacturing industry, whose 2.06 percent constant dollar output slide was its second straight monthly decrease and the worst since last September’s 4.12 percent plummet;
>Apparel and leather goods-makers, another pair of import swamped sectors, whose real production sank by 1.69 percent on month;
>Plastics and rubber products companies, whose 0.82 percent inflation-adjusted output falloff was its fourth straight monthly retreat and its biggest since January’s 1.09 percent; and
>The miscellaneous non-durable goods sector, where a 0.65 real production slip represented its fourth drop in last five months.
Sharp-eyed readers will notice something especially interesting in the above results: All the losers were found in the non-durable goods super sector. And in fact, not a single non-durable goods category registered a monthly real production gain in July.
The July results varied among the biggest manufacturing sub-categories in the industrial production report that have been making headlines lately or contribute significantly to domestic manufacturing’s health – or lack thereof.
Among heavily tariffed primary metal companies, inflation adjusted production slipped by 0.25 percent. That drop, however, followed a downwardly revised 2.31 percent increase that was the biggest since last December’s 2.40 percent. And year on year, primary metals production has expanded by 3.9 percent – a much better performance than for manufacturing as a whole. Further, between the previous Julys, constant dollar primary metals output actually fell – by 1.87 percent.
The big and diverse machinery complex is important because its products are used throughout the economy by companies either building new facilities or upgrading existing ones. Real output has been volatile in this sector, with July’s 0.26 percent sequential production stumble following a June increase that was revised up from 0.56 percent to 0.89 percent.
And year-on-year, price-adjusted machinery production is 0.87 percent higher than last July, whereas between the previous Julys it sagged by 0.69 percent.
Output has been volatile in the very big and heavily tariffed automotive sector with its vast domestic supply chain. July’s 0.30 percent inflation-adjusted production decrease was its second straight drop. The year-on-year results show just how dramatically output can vary. Between last July and this July, after-inflation output of vehicles and parts soared by 8.26 percent. Between the previous two Julys, it plunged by 12.91 percent, and between the Julys before that, surged by 9.36 percent.
And in the generously subsidized semiconductor and other electronic component manufacturing sector, a 1.40 percent July advance represented its fourth straight month of growth, and year-on-year constant dollar production sped up from 5.33 percent between July, 2023 and July, 2024, to 16.24 percent between July, 2024 and this July.
So overall, the monthly data on U.S. real manufacturing output hardly killed it today, but the longer-term results revealed a more encouraging story. No one can reasonably guarantee that the situation won’t deteriorate going forward. Yet domestic industry’s resilience so far during an unprecedented period of trade and tariff upheaval could provide valuable clues about U.S. manufacturing’s future, too.
