Detroit Regional Chamber > Chamber > U.S. factory output rises, gets boost from autos

U.S. factory output rises, gets boost from autos

August 18, 2021
The Detroit News 
Aug. 17, 2021
Vince Golle

Production at U.S. factories strengthened in July by the most in four months, rebounding above pre-pandemic levels and indicating manufacturers are coping with snarled supply chains and shortages.

The 1.4% increase followed a revised 0.3% drop in June, according to Federal Reserve data issued Tuesday.

Total industrial production, which also includes mining and utility output, rose 0.9% in July.

The median estimate in a Bloomberg survey of economists called for a 0.7% monthly increase in factory production and a 0.5% gain in industrial output.

While the results included a jump in vehicle production, output gains during the month were fairly broad.

Resilient business spending, steady consumer demand and lean inventories have fueled output growth but also driven up order backlogs as producers grapple with difficulties sourcing materials and parts.

The mismatch of supply and demand highlights room for further growth in factory output, especially if producers have more success filling open positions.

Manufacturers continue to face higher input prices and a near record number of job vacancies.

Recent data from the Labor Department showed a gauge of prices for processed goods used in the production process were up almost 23% from a year ago – the largest annual advance since 1975.

Meantime, job openings within manufacturing are close to a record at 826,000.

U.S. automakers continue to be constrained by a tight global chip market.

The Fed’s industrial output report showed production of motor vehicles increased 11.2% last month — the most in a year — after a 5.9% decline the previous month.

The Fed attributed the outsized gain to cancellations of typical July plant shutdowns to retool for new models.

Excluding autos and parts, manufacturing output rose 0.7% after a 0.1% gain.

Categories including machinery, primary metals, plastics and electrical equipment and appliances advanced from the prior month.

Manufacturing capacity utilization, a measure of plant use, jumped to 76.6%, finally breaking above the pre-pandemic level of 75.5%. Total industrial capacity rose to 76.1%.

Digging Deeper Utility output decreased 2.1% in July with temperatures somewhat below normal in July; mining output rose 1.2% after a 0.5% gain.

Oil and gas well drilling were up 6.1% after a 1.9% advance.

Production of business equipment advanced 2.8%, the most in four months, while output of construction supplies climbed 0.9%, the first gain since March.

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