US factory production was unexpectedly unchanged in May after gains in the prior months, according to the Federal Reserve. Despite the flat reading, an artificial intelligence spending boom by businesses is offering a lifeline to manufacturing, helping to offset some of the drag from import tariffs and the recent oil price shock.
AI Investment Supports Manufacturing
Business tax incentives for equipment investment are also supporting the sector. A separate survey from the New York Fed showed delivery times at factories in New York state lengthened further in June, with its measure of supply availability slumping to a four-year low.
Many businesses have feared since February that the sudden closure of the Strait of Hormuz would trigger supply chain disruptions later this year, and so placed orders with manufacturers early. Manufacturing output increased by an upwardly revised 0.7% in April. Production rose 0.2% in March after accelerating 0.7% in February.
Output of Long-Lasting Manufactured Goods
Output of long-lasting manufactured goods increased 0.8%, with motor vehicles and parts production advancing 1.2% after rebounding 3.3% in April. Output of computer and electronic products rose 0.9%, and was up 10.3% on a year-over-year basis. Electrical equipment, appliances and components production gained 0.5%.
Production of communications equipment rose 0.7% while that of semiconductors and related electronic components increased 2.4% after advancing 2.8% in April. Output of these goods surged 14.4% on a year-over-year basis. AI spending made a sizeable contribution to the economy’s 1.6% annualized growth pace in the first quarter.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
