Looking ahead, upcoming Q2 GDP figures and the July FOMC meeting will be critical in shaping the Fed's next moves and the overall economic outlook.

The Federal Reserve's latest industrial production index (IPI) report, released on July 16, 2025, shows sluggish growth of just 0.73% as of June, highlighting ongoing challenges in manufacturing, mining, and utilities sectors.

Investors are advised to focus on defensive sectors such as healthcare and utilities in the short term, while keeping an eye on semiconductor stocks for signs of recovery.

This subdued IPI reading underscores the economy's heavy reliance on the services and retail sectors, with manufacturing remaining stagnant due to factors like global demand slumps, inventory gluts, and supply chain issues, especially in semiconductors.

Market reactions included a selloff in industrial equities, particularly in machinery and auto stocks, and a decline in Treasury yields as investors adjusted expectations for future rate hikes.

While manufacturing struggles persist, the services sector continues to grow strongly, especially in healthcare and technology, contrasting the stagnation seen in goods production.

The IPI's annual growth rate of only 0.73% reflects ongoing difficulties, with the data calculated using a Fisher-ideal index that aggregates multiple sectoral series.

Contributing factors to the weak IPI include a global demand slump affecting export-heavy industries, overproduction leading to inventory gluts, and persistent supply chain frictions, particularly in semiconductors.

This weak economic data is likely to influence the Federal Reserve's monetary policy, with discussions possibly leaning towards pausing interest rate hikes if upcoming inflation data shows signs of cooling.