US manufacturing output was unchanged in June, but factory activity accelerated sharply during the second quarter.
Strong investment in artificial intelligence infrastructure supported production. Businesses also increased inventories as they prepared for potential shortages and higher prices linked to the conflict in the Middle East.
US Manufacturing Output Flat in June
Manufacturing production was unchanged in June, according to data released by the Federal Reserve on Friday.
May’s increase was revised higher to 0.1%. Economists surveyed by Reuters had expected factory output to rise by 0.1% in June.
Compared with the same month last year, US manufacturing output increased by 1.1%.
Factory Growth Reaches Five-Year High
Despite the weak monthly result, manufacturing expanded at an annualised rate of 4.7% during the second quarter.
That was the fastest quarterly growth rate in five years. It also represented a significant improvement from the 1.4% expansion recorded during the first three months of the year.
The stronger quarterly performance suggests that underlying factory activity remained resilient despite uneven monthly data.
AI Investment Supports US Factories
Heavy business spending on artificial intelligence has become an important source of demand for US manufacturers.
Manufacturing represents approximately 9.4% of the US economy. Growth in computers, semiconductors and communications equipment has helped offset weakness in other areas.
Businesses have also been building inventories to protect themselves against possible supply disruptions and higher costs caused by geopolitical tensions.
Semiconductor Production Accelerates
Production of semiconductors and related electronic components increased by 0.5% in June.
During the second quarter, semiconductor output grew at an annualised rate of 10.2%.
The strong performance reflects rising demand for chips used in AI data centres, cloud computing and other advanced technologies.
Computer and Communications Equipment Grow
Production of computers and peripheral equipment declined by 0.5% during June.
However, output remained 9.2% higher than a year earlier and expanded at a 7.2% annualised rate during the second quarter.
Communications equipment production rose by 0.7% in June. It increased at an annualised rate of 9.6% during the quarter.
These figures show that technology-related manufacturing remained one of the strongest areas of US industrial activity.
Vehicle Production Rises
Motor vehicle and parts production increased by 0.7% in June.
The gain helped support overall factory output during the month.
However, production of durable manufactured goods declined by 0.1%. This decrease offset a 0.2% rise in the production of non-durable goods.
Durable goods include products designed to last several years, such as machinery, vehicles and household appliances.
Mining and Energy Output Increase
Mining production rose by 0.4% in June after increasing by 1.1% in May.
Energy-related output advanced by 0.5%, while oil and gas well drilling increased by 0.3%.
The gains indicate that US energy production continued to expand despite uncertainty in global commodity markets.
Hot Weather Boosts Utility Production
Utility production rebounded by 0.4% in June after declining by 0.7% in May.
Higher temperatures increased demand for air conditioning and electricity.
Weather-related utility demand helped lift total industrial production during the month.
US Industrial Production Edges Higher
Overall US industrial production increased by 0.1% in June, matching the revised gain recorded in May.
Industrial output was also 1.1% higher than a year earlier.
During the second quarter, total industrial production grew at an annualised rate of 4.0%.
The figures cover manufacturing, mining and utility activity across the US economy.
Capacity Utilisation Remains Below Average
Industrial capacity utilisation was unchanged at 76.1% in June.
Capacity utilisation measures how fully companies are using their factories, equipment and other resources.
The June reading remained 3.3 percentage points below its average between 1972 and 2025.
Manufacturing capacity utilisation slipped slightly to 75.7% from 75.8% in May. It remained 2.5 percentage points below its long-term average.
US Manufacturing Outlook Remains Mixed
The latest data present a mixed picture for US manufacturing.
Monthly factory output remained flat, while quarterly growth reached its strongest pace in five years.
AI investment, semiconductor demand and inventory building continue to support the sector. However, low capacity utilisation and uneven production across industries suggest that manufacturing still faces important challenges.
