WASHINGTON (Reuters) -U.S. factory production unexpectedly increased in August amid a rebound in the output of motor vehicles and some nondurable goods, though tariffs continued to cast a shadow over the manufacturing sector.

Manufacturing output rose 0.2% last month after a downwardly revised 0.1% fall in July, the Federal Reserve said on Tuesday. Economists polled by Reuters had forecast production for the sector, which accounts for 10.2% of the economy, would slip 0.2% following a previously reported unchanged reading in July.

Production at factories increased 0.9% on a year-over-year basis in August. 

President Donald Trump's tariffs, ranging from a 50% duty on steel and aluminum to a 25% tax on motor vehicles and parts, have weighed on some segments of manufacturing, but others have been boosted by a boom in spending on artificial intelligence. 

Trump has defended the duties as necessary to revive a long-declining U.S. industrial base, though economists argue that effort cannot be accomplished in a short period of time, citing high production and labor costs as among the challenges.

Motor vehicle and parts production rebounded 2.6% last month after declining 0.7% in July. But output of fabricated metal products and machinery decreased. Durable manufacturing production increased 0.2% after gaining 0.3% in July. 

Nondurable manufacturing output rebounded 0.3% after declining 0.5% in the prior month. There were increases in the production of textiles, petroleum and coal products, but output of plastics and rubber products fell. Production of chemicals, food, beverage and tobacco products increased. 

Mining output rebounded 0.9% after decreasing 1.5% in July. Utilities production dropped 2.0%. That reading followed a 0.7% decline in the prior month. Overall industrial production edged up 0.1% after sliding 0.4% in July. Industrial output advanced 0.9% on a year-over-year basis. 

Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, was unchanged at 77.4% in August. It is 2.2 percentage points below its 1972-2024 average. The operating rate for the manufacturing sector edged up one-tenth of a percentage point to 76.8%. It is 1.4 percentage points below its long-run average.