Manufacturing remains weak despite auto and aerospace gains
U.S. factory production edged up just 0.1% in May, according to Federal Reserve data released Tuesday, as solid gains in vehicle and aircraft manufacturing were offset by broader sector weakness. April’s data was revised downward to show a 0.5% decline, painting a fragile picture of the industrial economy.
Manufacturing, which makes up 10.2% of the U.S. economy, is being strained by President Donald Trump’s shifting tariff policies. Recently doubled duties on steel and aluminum, alongside a 25% tariff on motor vehicles and parts, have raised input costs for producers and added uncertainty to investment decisions.
Mixed output trends across key industries
Auto and parts production surged 4.9% in May, rebounding from a 2.3% decline in April. Aerospace and transportation equipment output rose 1.1%. However, other areas dragged on the overall performance: fabricated metal products, machinery, and nonmetallic mineral products all fell by at least 1.0%.
Durable goods manufacturing rose 0.4%, while nondurable manufacturing slipped 0.2%, weighed down by printing, petroleum, food, and beverage production. Notably, nondurable consumer goods production dropped 0.8%, driven by a 3.2% plunge in energy-related goods.
Overall industrial activity dips despite slight gains in mining
Broader industrial production, which includes manufacturing, mining, and utilities, declined 0.2% in May following a 0.1% gain in April. Compared to a year earlier, industrial output was up 0.6%. Mining output nudged up 0.1%, while utilities output dropped 2.9%, led by a steep 3.6% fall in electric utilities.
These figures come as producers continue to struggle with high labor and material costs. Economists caution that efforts to revive domestic manufacturing through tariffs may backfire in the short term by suppressing output and investment.
Capacity use drops, signaling underutilized industry
Capacity utilization for the overall industrial sector fell to 77.4% from 77.7% in April, sitting 2.2 percentage points below the 1972–2024 average. For manufacturing, the operating rate was unchanged at 76.7%, still 1.5 percentage points below the long-run norm.