"With the global backdrop still weak and the survey evidence consistent with manufacturing output declining, we expect the manufacturing sector to remain weak in the second half too," said Michael Pearce, senior U.S. economist at Capital Economics.
Production at the nation's utilities fell 3.6%, as a milder than usual June led to less demand for air conditioning. Production at mines, a sector that also covers oil and gas drilling, advanced a modest 0.2%.
Capacity utilization fell in June to 77.9% from 78.1% in May. The weakness in manufacturing has held back industrial output. During the April-June quarter, industrial production tumbled at an annual rate of 1.2%, the second straight quarterly decline. The April-June quarter saw sharp decreases in the making of machinery, motor vehicles, fabricated metals, textiles, paper and plastics and rubber products, among other goods.
The import taxes on roughly $250 billion worth of Chinese goods have increased the costs for manufacturers that rely on foreign components, as well as created uncertainties about a global supply chain that keeps factory output steady. The Trump administration has relied on tariffs as leverage for causing China to trade on more favorable terms with the United States.