Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTBy Lucia MutikaniMon, June 15, 2026 at 6:19 PM GMT+2 4 min readBy Lucia MutikaniWASHINGTON, June 15 (Reuters) - U.S. factory production was unexpectedly unchanged in May after gains in the prior months, which some economists said were related to businesses building up inventory in anticipation of shortages and higher prices due to the war in the Middle East.Despite the flat reading in output reported by the Federal Reserve on Monday, an artificial intelligence spending boom by businesses is offering a lifeline to manufacturing, helping to offset some of the drag from import tariffs and the recent oil price shock. Business tax incentives for equipment investment are also supporting the sector.A separate survey from the New York Fed showed delivery times at factories in New York state lengthened further in June, with its measure of supply availability slumping to a four-year low. The U.S. and Iran said on Sunday they had agreed terms to end the war and reopen the Strait of Hormuz, though the pact may hinge on an end to hostilities in Lebanon."Many businesses have feared since February that the sudden closure of the Strait of Hormuz would trigger supply chain disruptions later this year, and so placed orders with manufacturers early," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.Manufacturing output increased by an upwardly revised 0.7% in April. Production rose 0.2% in March after accelerating 0.7% in February. Economists polled by Reuters had forecast production in the sector, which accounts for 9.4% of the economy, would increase 0.2% after a previously reported 0.6% surge in April.Output at factories increased 1.4% on a year-over-year basis in May. Output of long-lasting manufactured goods increased 0.8%, with motor vehicles and parts production advancing 1.2% after rebounding 3.3% in April. Output of computer and electronic products rose 0.9%, and was up 10.3% on a year-over-year basis.Electrical equipment, appliances and components production gained 0.5%. Production of communications equipment rose 0.7% while that of semiconductors and related electronic components increased 2.4% after advancing 2.8% in April. Output of these goods surged 14.4% on a year-over-year basis.AI spending made a sizeable contribution to the economy's 1.6% annualized growth pace in the first quarter."While much of this investment is imported, domestic production of these goods has also been rising and will likely continue to boost total manufacturing activity in coming months," said Veronica Clark, an economist at Citigroup.NON-DURABLE GOODS PRODUCTION FALLSTerms and Privacy PolicyPrivacy & Cookie SettingsMore Info