Factory output falls in fresh supply chain warning
Production at U.S. factories fell by the most in seven months in September, in part reflecting a sharp pullback in the manufacturing of motor vehicles as well as broader backlogged supply chains and materials shortages.
The 0.7% decrease for manufacturers followed a revised 0.4% decline in August, Federal Reserve data showed Monday. Total industrial production, which also includes mining and utility output, fell 1.3% last month.
The median estimate in a Bloomberg survey of economists called for a 0.1% monthly increase in both factory production and industrial output. Stocks fell and Treasury yields were up after market open.
Resilient demand among firms and consumers has kept production elevated, but it’s also contributed to order backlogs as manufacturers struggle to source materials and skilled labor. The weaker-than-expected September print indicates that producers continue to be held back by snarled supply chains.
The figures also reflect ongoing production challenges following Hurricane Ida, which contributed 0.3 percentage point to the drop in manufacturing, the Fed said.
In a note to clients, economist Daniel Silver of J.P. Morgan said the September data disappointed, “particularly in the manufacturing sector where it looks clear that supply chain issues are continuing to weigh on activity,” according to the Associated Press.
The report showed motor vehicles and parts output fell 7.2% last month, the sharpest drop since April, as a global shortage of semiconductors continues to weigh on production.
Automakers have slashed production outlooks for the coming months, citing the parts shortage S&P Global Ratings also lowered its U.S. auto sales forecast for this year and expects a “bumpy road” in 2022.