US manufacturing production stalled in May after four months of gains as a drop in chemical and petroleum output masked ongoing strength in categories tied to the data center boom.

Factory output was little changed last month after an upwardly revised 0.7% advance in April, Federal Reserve data out Monday showed. The median estimate in a Bloomberg survey of economists called for a 0.3% advance.

The data showed a split between durable goods manufacturing, which continued to advance, and nondurable goods manufacturing, which was dragged down by declines in chemical and petroleum products. Output of synthetic dyes and pigments dropped 5.5% over the last three months, possibly reflecting supply-chain problems created by the war.

“Manufacturing of durable goods supported headline industrial output, as the data-center buildout and some onshoring drove capital-spending plans,” Stuart Paul of Bloomberg Economics said in a note after the release. “But far from representing a manufacturing renaissance, we estimate that factory output increased only in about one-third of categories.”

Recent surveys have indicated a pickup in activity amid customer stockpiling induced by the war, rising defense-related orders and the ongoing data center buildout. A separate report last week showed prices received by producers rose in May from a year earlier at the fastest pace since 2022 as the impact of disrupted supply chains spread across the economy.

Manufacturing activity in categories exposed to the data-center buildout remained strong. Output of computer and electronic products rose more than 4% in the three months through May, the most in five years.

Production of defense and space equipment climbed for a sixth straight month, to the highest level since December 2019. Economists see efforts to replenish munitions used in the war, as well as the potential for rising exports as part of recent trade deals, as one possible driver of growth this year.

The Fed report showed oil and gas well drilling activity rose 5% in May, marking the biggest monthly increase in more than four years in a sign that US shale companies started to respond to higher prices.

Capacity utilization at factories was little changed. Total industrial production, which also includes output of utilities and mining, rose 0.1%.

Separate data Monday showed factory activity in New York state expanded only modestly in June after a strong advance in May. An index of future selling prices rose to the highest level since 2022, “suggesting that firms widely expect to raise their prices over the next six months,” according to the Federal Reserve Bank of New York report.

Written by: Matthew Boesler — With assistance from Mark Niquette @Bloomberg

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