Industrial production expanded in July

August 18, 2026

Industrial production edged up 0.2% in July, falling short of market expectations for a 0.3% gain. On an annualized basis, industrial production cooled to 1.1%, slower than the 1.3% improvement in June and 1.5% in May. The monthly gain for June was revised up to 0.3% from 0.1%.

Manufacturing output grew by a similarly modest 0.2% in July. Durable goods production increased 0.7%, marking eight straight months of gains. Wood products led the expansion, reaching the best growth rate since February 2024. Some wood products from Canada have been threatened with a 50% tariff.

Industries related to the AI-boom bounced back in July after a soft performance in June. Computer and electronic products have gained 9.9% year-over year, while electrical equipment, appliances and components hit 6.2% on an annualized basis. Investment in AI continues to support business investment.

Motor vehicles and parts posted the worst month since October last year, sliding 2.1%. Motor vehicle assemblies declined across all categories in July while retail sales of autos fell 1.8%, the weakest performance in more than a year. The price of new vehicles remains out of reach for most middle- and lower-income households, pushing many buyers to choose used vehicles.

Nondurable goods production slipped 0.4%, held back by printing, apparel and leather manufacturing. Textiles and product mills, petroleum and coal, plastics and rubber products supported the sector.

Mining output edged up 0.2%, slower than the 0.3% pace of May. Utilities gained 0.5% in July, up from 0.1% in the previous two months. Both electric power generation and natural gas production increased.

The Institute for Supply Management (ISM) manufacturing purchasing managers’ index (PMI) expanded in July for the seventh straight month, reaching a level not seen since May 2022. Other regional manufacturing surveys are showing improvement. The Middle East conflict threatens this growth, but restocking inventories will provide a cushion. 

The US Mexico Canada trade agreement (USMCA) was not renewed in early-July, putting the pact into “zombie mode.” Annual reviews will take place until 2036 when the deal could be voided if not renewed. That could eventually put at risk the industrial inputs that currently cross the three countries’ borders tariff-free, especially for the auto industry. 

New sectoral and country tariffs added to stricter enforcement continue to push firms and consumers back on their heels. Some firms pulled production forward in an effort to get ahead of higher expected costs.