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U.S. Industrial Production Unexpectedly Tumbles 1.3% In September

18/10/2021 11:06am

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Industrial production in the U.S. unexpectedly showed a steep drop in the month of September, the Federal Reserve revealed in a report released on Monday.

The Fed said industrial production tumbled by 1.3 percent in September following a revised 0.1 percent dip in August.

The sharp decline surprised economists, who had expected industrial production to edge up by 0.2 percent compared to the 0.4 percent increase originally reported for the previous month.

The report said manufacturing output fell by 0.7 percent, with the production of motor vehicles and parts plunging by 7.2 percent amid the semiconductor shortage.

Utilities output also plummeted by 3.6 percent, as demand for cooling subsided after a warmer-than-usual August, while mining production slumped by 2.3 percent due to the lingering effects of Hurricane Ida.

"The drag from Hurricane Ida will inevitably fade, but supply-side constraints will be with us for some time," said Oren Klachkin, Lead U.S. Economist at Oxford Economics. "Logistics difficulties are the worst chokepoint, and input shortages, hiring constraints, and little spare domestic production capacity are making problems worse."

"We expect supply to catch up to demand around mid-2022, but it could take longer to overcome these challenges," he added. "Meanwhile, forward-looking data signal demand will stay robust next year."

The Fed also said capacity utilization for the industrial sector slid to 75.2 percent in September from a downwardly revised 76.2 percent in August.

Economists had expected capacity utilization to inch up to 76.5 percent from the 76.4 percent originally reported for the previous month.

Capacity utilization in the manufacturing sector fell to 75.9 percent, while capacity utilization in the mining and utilities sectors slumped to 73.9 percent and 73.0 percent, respectively.

Despite the monthly decrease in September, the Fed noted total industrial production jumped 4.3 percent year-over-year for the third quarter as a whole, reflecting the fifth consecutive quarter with a gain of at least 4 percent.

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