Most of U.S. Manufacturing sector remains in a sorry state

💡 Summary:

• Production of consumer goods slumps most since early 2021

• Output dropped 0.5% in June for a second month, Fed says

• Boosted by a 36.7% surge in the production of motor vehicles and parts in the second quarter

• Manufacturing may benefit some in coming months as retailers get inventories more in line with sales and the pace of goods inflation slows

The June index of production at factories, mines and utilities decreased 0.5% for a second month, Federal Reserve data showed Tuesday. Manufacturing output declined 0.3% in June, the most in three months, but rebounded in the second quarter as motor vehicle output accelerated after two straight quarterly declines. The decline was below expectations of a flat reading, according to a survey of economists by The Wall Street Journal.

Manufacturing output of consumer goods meant to last three years and more fell 2.7%, led by notable declines in appliances, furniture, and carpeting as well as automotive products. Production of non-durable consumer goods fell 0.9%, pulled down by clothing, energy as well as food and tobacco.

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.

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