US manufacturing production stalled in May after four months of gains, suggesting problems with supply chains disrupted by the Iran war and soaring costs may be starting to weigh on activity.
The US industrial production maintained a resilient annual trajectory in May-26, expanding faster by +1.7%yoy (Apr-26: +1.4%yoy), with manufacturing output firming to +1.4%yoy from +1.2%yoy previously.
On a monthly basis, however, the momentum showed signs of cooling as total industrial production edged up by just +0.1%mom in May26, undershooting market expectations of a +0.3%mom rise following Apr-26 upwardly revised +0.9%mom surge. This monthly deceleration was heavily attributable to the flat growth in manufacturing sector, which constitutes approximately 78% of industrial output, against market forecast of a +0.2%mom gain and slowing from a robust +0.7%mom expansion in Apr-26.
Mining production provided a positive growth with a +1.3%mom, while utility output contracted by -0.4%mom as a -1.7%mom drop in electricity generation more than offset an +8.5%mom spike in natural gas output. Production in categories exposed to the data-centre buildout, including computers and electronic products, electrical equipment, fabricated metals, machinery and primary metals, increased. Those industries have helped support factory activity even as shortages of inputs like memory chips and plastic resins are pressuring supply chains.
This latest data highlights a growing divergence between technology trends and cyclical macroeconomic headwinds. The growth in digital infrastructure and data-centre investment provides a reliable structural support for US industrial activity. HLIB noted that the flat monthly manufacturing output confirms that broader factory activity is starting to be impacted by uncertainty in the business and investment outlook and mounting supply-chain frictions triggered by the Middle East conflicts.
