WASHINGTON (Reuters)

US factory production barely rose in May as a surge in motor vehicle and aircraft output was partially offset by weakness elsewhere, and the outlook for manufacturing remains clouded by tariffs.

Manufacturing output edged up 0.1 per cent last month after a downwardly revised 0.5 per cent decline in April, the Federal Reserve said on Tuesday (June 17). Economists polled by Reuters had forecast production rebounding 0.2 per cent after a previously reported 0.4 per cent drop. Production at factories increased 0.5% on a year-over-year basis in May. 

President Donald Trump’s shifting tariffs policy poses a significant headwind to manufacturing, which accounts for 10.2 per cent of the economy and relies heavily on imported raw materials.

Trump recently doubled steel and aluminium duties to 50 per cent from 25 per cent. The array of tariffs includes a 25 per cent tax on motor vehicles and parts.

Trump has defended the duties as necessary to revive a long-declining US industrial base, but economists say that cannot be accomplished in a short period of time, citing high production and labour costs as among the challenges. 

Motor vehicle and parts output accelerated 4.9 per cent last month after declining 2.3 per cent in April. Production of aerospace and miscellaneous transportation equipment increased 1.1 per cent. But output of fabricated metal products, machinery and non-metallic mineral products all posted declines of at least 1.0 per cent.

Durable manufacturing production rose 0.4 per cent. Nondurable manufacturing production dropped 0.2 per cent, pulled down by decreases in the output of printing and support, petroleum and coa,l as well as food, beverage and tobacco products. 

Nondurable consumer goods production fell 0.8 per cent amid a 3.2 per cent plunge in energy nondurable consumer goods.

Mining output ticked up 0.1 per cent after falling 0.3 per cent in the prior month. Utilities production fell 2.9 per cent, with a 3.6 per cent decline in electric utilities output more than offsetting a 2.7 per cent increase in natural gas utilities output. That followed a 4.9 per cent surge in April.

Overall industrial production fell 0.2 per cent after gaining 0.1 per cent in April. It rose 0.6 per cent on a year-over-year basis in May.

Capacity utilisation for the industrial sector, a measure of how fully firms are using their resources, fell to 77.4 per cent from 77.7 per cent in April. It is 2.2 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector was unchanged at 76.7 per cent. It is 1.5 percentage points below its long-run average.