The Federal Reserve (Fed) reported on Tuesday (17th) that US industrial production fell by 0.2% in May compared to the previous month, marking the second decline in three months. A major factor was a drop in electricity generation; although manufacturing saw a slight rebound, the overall performance remained weak, highlighting that the current demand environment is still pressured by multiple factors, including tariff uncertainties and a chaotic economic outlook.

According to the report, manufacturing output increased slightly by 0.1%, primarily driven by a rebound in automotive and aerospace production. Automotive and parts production surged 4.9% in the month, the largest increase in nearly a year, offsetting previous declines. However, when excluding automotive items, other sectors such as machinery and metal processing continued to decline, reflecting that overall manufacturing demand has yet to see a significant rebound.

The non-durable goods sector performed poorly, with most areas, including food, petrochemicals, printing, and tobacco, experiencing declines, causing the overall non-durable goods manufacturing to decrease by 0.2%. Furthermore, consumer goods production, which reflects consumer trends, has declined for three consecutive months, with energy-related products showing a notable drop of 3.2% for the month.

The report also indicated that the overall capacity utilization rate in the US fell from 77.7% the previous month to 77.4%, while the manufacturing capacity utilization rate remained at 76.7%, both below historical average levels. This indicates that under the pressure of various policy and economic uncertainties, companies are still responding conservatively when it comes to production expansion.

Much attention is focused on how the Trump administration's constantly adjusting tariff policies are impacting the manufacturing sector. Recently, tax rates on items like automotive parts and steel-aluminum products have been raised again, further disrupting companies' procurement and investment plans. Although Trump asserts that tariffs help revive the US industrial base, economists generally believe that positive effects are unlikely to materialize in the short term, but instead may increase production costs and market uncertainties.

The Fed stated that companies currently face weakening demand and an unstable policy environment, particularly as tariff and fiscal spending bills are still under debate, leading some planned investments and expansions in the US to be delayed. According to surveys from the New York Federal Reserve and the ISM manufacturing index, recent manufacturing sentiment in the US remains low, indicating that the current production rebound may not be sustainable.