Industrial production took back some of the strong gains from June, falling 1.1 percent month-on-month from a revised gain of 3.7 percent the previous month. Compared to July of last year, output rose 1.3 percent in July, a more modest gain than the 2.2 percent recorded in June.

Manufacturing output fell 1.7 percent in July, as transportation equipment production contracted 10.7 percent from June, the largest decline since April 2020 when it plummeted 48.5 percent during the pandemic. The decline can be laid at the feet of a sharp decline in aerospace output in July. This, for now, doesn't signal an overall implosion in production, but rather the pullback from very strong results in June.

The same pattern held true for the manufacture of machinery and equipment which fell 2.2 percent in July after a 3.9 percent month-on-month gain in June. At the same time, other manufacturing gained 1.0 percent in June after a rather tepid 0.2 percent gain the previous month.

Capital goods output dropped 4.8 percent in July after a gain of 7.0 percent the previous month, while intermediate goods rose 1.0 percent, extending a 0.6 percent gain in June. Consumer durables production rose 1.7 percent, another strong gain after 2.1 percent in June. For non-durable consumer goods, production fell 0.2 percent in July from a 0.3 percent gain previously.

Despite today's decline in transportation output, the sector has been outperforming all the other major components this year, a trend going back to the middle of 2022. Looking ahead, the manufacturing PMI increased to 50.4 in August and showing expansion for the first time since January 2023.

Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and cause misleadingly large short-term swings in total industrial production.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios. Like the PPI and the orders data, construction is excluded from the data. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.