US manufacturing output unchanged in June, but accelerates in second quarter

WASHINGTON, July 17 (Reuters) – U.S. factory production was unchanged in June, but grew at a robust pace in the second quarter, driven by an artificial intelligence build-up and businesses accumulating inventory in ​anticipation of shortages and higher prices due to the war ‌in the Middle East.

The flat reading in manufacturing output last month reported by the Federal Reserve on Friday followed an upwardly revised 0.1% gain in May. Economists polled by Reuters had forecast production edging up 0.1% after a previously reported unchanged reading in ‌May. ​Output increased 1.1% year-on-year in June.

It grew at ⁠a 4.7% annualized rate in ⁠the second quarter, the fastest in five years, after expanding at a 1.4% pace in the January-March quarter.

Businesses are spending heavily on AI, keeping manufacturing, which accounts for about 9.4% of the economy, afloat. Motor ​vehicles and parts production rose 0.7% over the month. Though output of computers and peripheral equipment fell 0.5%, it increased 9.2% year-on-year and ⁠rose at a 7.2% rate in the ⁠second quarter. Production of communications equipment increased 0.7% in June ​and grew at a 9.6% rate last quarter.

Output of semiconductors and related electronic ​components rose 0.5% last month and increased at a 10.2% ‌pace in the second quarter. Production of long-lasting manufactured goods slipped 0.1% over the month, offseting a 0.2% gain in the output of non-durable goods.

Mining production rose 0.4% last month after increasing 1.1% in May. Energy output increased ⁠0.5%, with oil and gas well drilling rising 0.3%.

Utilities production rebounded 0.4% as higher temperatures boosted demand for air conditioning after dropping 0.7% in May.

Overall industrial ⁠production edged up 0.1% ‌last month after rising by the same margin in ⁠May. Industrial output increased 1.1% on a year-over-year basis ​in June. ‌It grew at a 4.0% rate in the ​second quarter.

Capacity utilization ⁠for the industrial sector, a measure of how fully firms are using their resources, was unchanged at 76.1 in June. It is 3.3 percentage points below its 1972–2025 average. The operating rate for the manufacturing sector dipped to 75.7% from 75.8% in May. It is 2.5 percentage points below its long-run average.

(Reporting ​By Lucia Mutikani)