U.S. Industrial Production Falls in May Amid Weak Demand, Tariff Uncertainty

U.S. industrial production contracted in May 2025, marking its second decline in three months, driven by a sharp drop in utility output and ongoing challenges in manufacturing. According to Federal Reserve data, industrial output fell 0.2%, missing economists’ expectations of no change, following a modest 0.1% increase in April.

Manufacturing output inched up 0.1%, propped up by a surge in motor vehicle assemblies, but broader factory performance remained uneven. A nearly 5% rise in auto production, reaching an annualized 11.19 million units—the highest in over a year—offset declines in machinery and fabricated metals.

Utility production plummeted 2.9%, weighing heavily on overall industrial output, while mining and energy extraction saw marginal gains. Excluding autos, factory production dropped for the second consecutive month.

Evolving US trade policies and tariff uncertainties continue to cloud manufacturers’ outlook, complicating demand forecasts both domestically and globally. A temporary US-China trade war de-escalation agreement has eased some concerns, but manufacturers remain cautious amid volatile conditions.

Consumer goods production, spanning cars, appliances, and electronics, declined for the third straight month, reflecting weaker demand. Meanwhile, business equipment output gained momentum.

Retail sales also faltered, dropping for the second consecutive month in May, as tariff-related anxieties and financial pressures curbed consumer spending. This pullback follows a robust spending surge earlier in the year, signaling shifting economic sentiment.