Industrial Production Slipped in July

August 15, 2025

Industrial production slumped 0.1% in July after June data were revised slightly higher. The index remains 1.4% higher than a year ago. Capacity utilization, a measure of what an operation can realistically produce, moved lower to 77.5%.

Manufacturing output was flat for the month but 1.4% higher than a year ago. Within manufacturing, durable goods rose 0.3% on a broad-based level. Primary metals, machinery and motor vehicles and parts made up the outliers, falling 0.3% each. Vehicle production increased 1% in July but the overall indicator edged lower due to a 1.6% drop in parts output. That is where tariffs hit hardest, impacting inputs and raw materials costs. The silver lining this time showed up in semiconductors and computers output, up 1.4% and 2.9%, respectively. Investment in AI infrastructure has been on a tear. It has almost single-handedly supported investment in the first half of the year.

Nondurable manufacturing output was 0.4% lower in July as all categories posted losses. The largest falls came from textiles, apparel and plastics. Nondurable goods make up about half of all manufacturing output.

Mining output fell 0.4%. Oil and gas drilling was off 2.1% in July and 10% below year-ago levels. Oil prices averaging $63 a barrel over the past five months are keeping a lid on added oil production. The Organization of the Petroleum Exporting Countries has raised its production targets, which will keep prices in this range for the near term.

Utilities output slipped 0.2% due to a drop in electricity output. Commercial and other electricity sales have been driving the overall growth in the index since 2020, while industrial and residential sales have been flat over the same period. Increased investment in data centers is already placing pressure on local electrical grids. Energy usage has moved up after being relatively stable for more than a decade in the last two years.