US industrial production grows 0% in July, falling short of expectations

US industrial production came in flat for July, posting 0% month-over-month growth according to the Federal Reserve’s G.17 report released on August 18. Economists had been expecting somewhere in the range of 0.1% to 0.3% growth, making this a miss that, while not dramatic, adds to a growing pile of evidence that the manufacturing engine is sputtering.

A preliminary reading had suggested a modest 0.2% increase, but the final figure landed right at zero. For context, June managed a 0.1% rise, which wasn’t exactly cause for celebration either. Manufacturing output remained unchanged across both months.

The numbers behind the flatline

The total industrial production index sat at 102.6 as of June, benchmarked to 2017 levels. Year-over-year growth through June clocked in at 1.1%.

Capacity utilization held steady at 76.1%.

Mining and utilities each posted 0.4% gains in June. Manufacturing, the largest component of industrial production, has been the dead weight pulling the headline number down.

What the Fed is watching

The G.17 report is one of several data points the Federal Open Market Committee weighs when deliberating on interest rates. It offers a real-time snapshot of physical economic activity that surveys and sentiment indexes can’t replicate.

With the July reading disappointing relative to expectations, hawks who want to keep rates elevated can point to the capacity utilization figure holding steady at 76.1%. Doves can counter that two consecutive months of essentially zero manufacturing growth suggest the restrictive policy stance is biting harder than intended.

The timing of this release is notable. It lands ahead of the FOMC’s next meeting cycle, giving committee members fresh data ahead of upcoming interest rate discussions.

Manufacturing’s stagnation contrasts sharply with the relative strength in mining and utilities, each of which posted 0.4% gains in June. Energy-related production, captured partly in the mining and utilities figures, appears to be holding up better than goods manufacturing.

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