WASHINGTON, Nov. 16 (Reuters) – Production at U.S. factories rebounded more than expected in October as the weight of Hurricane Ida faded and motor vehicle production picked up, but manufacturing continues to be limited by shortages of raw materials and labor.
Manufacturing output jumped 1.2% last month to its highest level since March 2019, after falling 0.7% in September, the Federal Reserve said on Tuesday. Economists polled by Reuters predicted a 0.7% increase in manufacturing output.
Production was up 4.5% from October 2020. Manufacturing, which accounts for 12% of the US economy, is supported by companies desperate to replenish depleted stocks.
Spending has shifted to goods from services during the COVID-19 pandemic, straining global supply chains. Raw materials such as semiconductors are scarce. Workers are also scarce, hampering the delivery of materials to factories as well as the shipment of finished products to markets.
Even with spending on services returning as coronavirus infections caused by the Delta variant decline, demand for goods remains strong.
Production at auto factories rebounded 11.0% last month after declining for two consecutive months. Excluding autos, manufacturing output rose 0.6% in October.
Production of consumer goods rebounded 1.4%. But machine production fell 1.3% due to an ongoing strike at John Deere. The jump in manufacturing output last month combined with a 4.1% rebound in mining and a 1.2% rise in utilities to boost industrial production by 1.6%. This followed a 1.3% drop in September.
Capacity utilization for the manufacturing sector, a measure of how well companies are making full use of their resources, increased 0.9 percentage points in October to 76.7%, the highest since January 2019. L Overall capacity use for the industrial sector increased to 76.4% from 75.2% in September. . It is 3.2 percentage points lower than its 1972-2020 average.
Fed officials tend to look at capacity utilization metrics for signals of how much “slack” remains in the economy – how far growth has room before it turns inflationary.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
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