The Federal Reserve (Fed) reported on Tuesday (17th) that US industrial production fell by 0.2% in May compared to the previous month, marking the second decline in three months. The decline was mainly driven by a drop in electricity output, while the manufacturing sector showed a slight rebound. However, the overall performance remains weak, highlighting that the current demand environment is still constrained by multiple factors, including tariff uncertainties and a chaotic economic outlook.

According to the report, manufacturing output increased slightly by 0.1%, primarily due to a rebound in automotive and aerospace equipment production, with automotive and parts production surging by 4.9%—the largest increase in nearly a year, compensating for the previous month’s decline. However, excluding the automotive sector, other industries such as machinery and metal processing continue to exhibit declining output, reflecting that overall manufacturing demand has not shown a significant recovery. Aerospace and other transportation equipment production rose by 1.1%, but non-metallic minerals, machinery, and metal products all fell by over 1%.

The non-durable goods sector showed weak performance, with most areas such as food, petrochemicals, printing, and tobacco witnessing declines, leading to an overall drop of 0.2% in the non-durable goods manufacturing sector. Consumer goods output, reflecting consumption trends, has also declined for three consecutive months, with energy-related consumer goods experiencing a particularly noticeable drop of 3.2% month-on-month.

The report further indicated that the overall capacity utilization rate in the US fell from 77.7% in the previous month to 77.4%, while the manufacturing capacity utilization rate remained at 76.7%, both below historical average levels. This indicates that, under pressure from multiple policies and economic uncertainties, businesses remain cautious about expanding production.

There is widespread concern regarding the impact of the constantly adjusted tariff policies under the Trump administration on the manufacturing sector. Recently, tax rates on items such as automobiles and parts, steel, and aluminum products were raised again, further disrupting companies' purchasing and investment plans. Although Trump asserts that tariffs help revitalize the American industrial base, economists generally believe it will be difficult to see positive effects in the short term and may instead increase production costs and market uncertainty. The Fed stated that companies currently face weak demand and a fluctuating policy environment, particularly as tariff and fiscal expenditure bills remain subjects of debate, causing a slowdown in some planned investments and expansions in the US. Surveys from the New York Federal Reserve and ISM manufacturing index indicate that the US manufacturing sector's performance remains low, suggesting that the current production rebound may be difficult to sustain.