US industrial production suffers surprise fall
Supply chain issues and Hurricane Ida hamper industrial activity
Industrial production in the United States fell by 1.3% in September, according to the Industrial Production and Capacity Utilization report published by the Federal Reserve on Monday.
The drop was far larger than the 0.2% increase that analysts surveyed by the Wall Street Journal had forecast. Economists polled by Reuters had predicted a 0.1% increase.
Impact of weather events
The figure constituted the largest drop since February, when activity in the southern US was hampered by a slew of winter storms.
Weather once again hindered mining activity and utilities output, which fell by 2.3% and 3.6%, respectively. Hurricane Ida was the fifth-largest hurricane on record to make landfall on the mainland US, causing a temporary exodus of oil workers from the Gulf of Mexico and substantial levels of flooding.
The Federal Reserve stated: “The lingering effects of Hurricane Ida more than accounted for the drop in mining in September…Overall, about 0.6 percentage point of the drop in total industrial production resulted from the impact of the hurricane.”
Supply chain issues
Output in the automobile sector fell by 7.2% “as shortages of semiconductors continued to hobble operations”.
Factory production fell by 0.7% in September, having fallen by 0.4% in August.
Indeed, the central bank revised its previous figure for total industrial production in August to a decline of 0.4%. Output was initially thought to have increased, returning the US to pre-Covid levels.
Supply chain issues have been identified as the major obstacle to restoring American industrial activity, from the rising cost of raw materials, to record levels of US workers quitting their jobs, to resistance to the Biden administration’s Covid-19 vaccine mandate.
By 11:00 (EDT), the Dow Jones Industrial Average traded down by 0.1%, while the Nasdaq Composite and S&P 500 indices traded up by 0.3% and 0.1%.
Further reading: FTSE falls as Bank of England signals interest rate hike