Output at U.S. factories falls after biggest gain this year

U.S. factory output retreated in July after rising a month earlier by the most this year, signalling manufacturing is having trouble gaining momentum against a backdrop of lacklustre global demand and a trade war with China.

The 0.4% decline in manufacturing output followed an upwardly revised 0.6% advance in the prior month, Federal Reserve data showed Thursday. The median estimate in a Bloomberg survey of economists called for a 0.3% July decrease.

Total industrial production, which also includes mines and utilities, fell 0.2% last month, reflecting a temporary decline in Gulf Coast oil extraction tied to Hurricane Barry.

The Fed’s report, which showed a weakening in factory output for the fifth time this year, is the latest sign of fragility in the manufacturing sector as goods producers face the persistent headwinds of the U.S.-China trade war and tepid global demand. The latest escalation of U.S. trade tensions with China and renewed recession fears may further depress manufacturing output in the coming months. At the same time, a pair of reports earlier Thursday from the Federal Reserve banks of New York and Philadelphia showed gauges of manufacturing expanded in August more than projected.

Another report Thursday showed American consumers continue to spend, which will help support domestic manufacturing. U.S. retail sales surged 0.7% in July, the most in four months and led by broad gains across merchant categories, the Commerce Department reported. The decline in July factory production was broad, including decreases in machinery, fabricated metals, electronic equipment, plastics and textiles.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up about threefourths of total industrial production, accounts for about 11% of the U.S. economy.