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U.S. factory production decline reflects supply chain backlog | Business and Economic News

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The total industrial output value, including mining and utility output, fell by 1.3% last month.

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The output of US factories in September saw the largest decline in seven months, partly due to a sharp decline in auto manufacturing, as well as broader supply chain backlogs and material shortages.

Data released by the Federal Reserve on Monday showed that the manufacturing sector fell by 0.7% in August, which was revised down to 0.4%. The total industrial output value, including mining and utility output, fell by 1.3% last month.

The median estimate of a survey of economists conducted by Bloomberg is a monthly increase of 0.1% in factory production and industrial output. After the market opened, the stock market fell, and the yield of Treasury bonds rose.

The elastic demand between enterprises and consumers keeps output on the rise, but it also leads to a backlog of orders due to manufacturers’ difficulty in purchasing materials and skilled labor. The lower-than-expected September data shows that manufacturers continue to be hindered by supply chain chaos.

The Fed stated that these data also reflect the continued production challenges following Hurricane Ida, which contributed 0.3 percentage points to the decline in manufacturing.

Car breakdown

The report shows that last month’s auto and parts production fell by 7.2%, the largest drop since April, and fell by 3.2% in August because the global semiconductor shortage continued to drag down production.

Automakers, including Toyota Motor Corporation, have lowered their production expectations for the next few months, citing shortages of parts as a limiting factor. Standard & Poor’s Global Ratings also lowered its forecast for US car sales this year, and it is expected that 2022 will be a “bumpy road.”

The Federal Reserve said that excluding automobiles, durable goods production increased by 0.5%, reflecting growth in primary metals, electrical equipment and furniture manufacturing. Non-durable manufacturing, including chemicals and paper products, fell 1% last month, the biggest drop since February.

Manufacturing job vacancies are close to record highs, and the prices of products that factories can purchase have soared. Recent data from the US Department of Labor shows that the price indicators of intermediate demand processed goods, including materials and components used in manufacturing and construction, have risen by nearly 24% from 12 months ago.

Deep excavation

  • The utilization rate of manufacturing capacity, which measures factory usage, dropped to 75.9%, while the total industrial capacity dropped to 75.2%
  • Utilities output fell 3.6% in September; oil and gas well drilling fell 1.2%
  • Mining output fell by 2.3%, reflecting the lingering impact of Ida
  • Commercial equipment output increased 0.4% after falling 0.6% last month



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