Slowing Growth Coupled with Rising Costs, U.S. Manufacturing Faces Dual Pressures
U.S. manufacturing output stalled for the first time this year in May. Data released by the Federal Reserve on Monday showed that U.S. manufacturing output in May was flat month-over-month, ending the previous four-month consecutive growth trend and falling below market expectations. The data showed that factory output in May was essentially unchanged from the previous month, while the April figure was revised upward to a 0.7% increase. Economists had generally expected manufacturing output to grow by 0.3% in May. Total U.S. industrial output, which includes manufacturing, utilities, and mining, rose by only 0.1%.
Cost Pressures Erode Production Willingness
Market participants pointed out that this official data presents a certain contrast with the results of several recent manufacturing surveys. Previous surveys had shown that the manufacturing sector as a whole continued to expand, driven by war-induced stockpiling demand, growth in defense orders, and the boom in AI data center construction. However, the latest data indicate that cost pressures are gradually eroding enterprises’ willingness to produce. Data released last week showed that the U.S. Producer Price Index (PPI) in May recorded its fastest year-over-year growth since 2022. Even excluding the automotive and parts industry, manufacturing output still failed to register growth.
Notable Sectoral Divergence
From the perspective of industry structure, durable goods manufacturing continued to grow, with sectors such as computers and electronics, electrical equipment, metal products, machinery, and basic metals all expanding, benefiting from the AI data center construction boom and capital expenditure growth brought about by the reshoring of manufacturing. However, non-durable goods manufacturing declined, with output in petroleum and coal products, plastic and rubber products, and textiles all retreating. Economist Stuart Paul stated that data center construction and some manufacturing reshoring plans are still supporting durable goods growth, but this does not mean that the United States is experiencing a comprehensive manufacturing renaissance.
Supply Chain Issues and Bright Spots Coexist
Supply chain issues persist, with key raw materials such as memory chips and plastic resins still in tight supply. On the other hand, output of defense and aerospace equipment grew for the sixth consecutive month, reaching its highest level since December 2019, with demand for ammunition inventory replenishment during wartime and expectations for military exports serving as important supports. Mining output rose by 1.3%, becoming a significant pillar of industrial growth, while utility output declined. The New York Fed’s manufacturing survey released on the same day showed that activity expanded only slightly in June, with an indicator reflecting expectations for future selling prices rising to its highest level since 2022. Analysts believe that U.S. manufacturing is currently facing a situation of slowing growth accompanied by rising costs.
