Production at U.S. factories weakened in August

Production at U.S. factories slowed more than anticipated in August. Hurricane and lingering shortages of raw materials and labor, as well as coronavirus pandemic, hit America.

The Federal Reserve stated on Wednesday that manufacturing output rose 0.2% in August. Data for July was revised to show production rising 1.6% instead of 1.4%, as previously announced.

Meanwhile, economists polled by Reuters had forecast manufacturing production would rise 0.4%.

Hurricane Ida devastated U.S. offshore energy production in Louisiana at the end of the previous month.

The Federal Reserve estimated that it subtracted 0.2 percentage point from manufacturing output. Ida led to plant closures for plastic resins, petrochemicals, and petroleum refining.

Moreover, factory production is 1% above its pre-COVID level, whereas output at auto plants gained 0.1%. The latest wave of infections driven by the Delta strain of the coronavirus worsened the raw materials crunch.

General Motors announced it would cut production at its plants in Missouri, Indiana, and Tennessee this month because of an ongoing microchip shortage. Additionally, Ford Motor Co is also reducing truck production.

August’s increase in manufacturing output and a 3.3% recovery in utilities lifted industrial production by 0.4%. Moreover, industrial output grew 0.8% in July. Meanwhile, mining production fell by 0.6% following hurricane Ida as it disrupted oil and gas extraction in the Gulf of Mexico.

Ameasure of how fully firms use their resources surged 0.1% to 76.7% in August

Furthermore, capacity utilization for the manufacturing sector, a measure of how fully companies use their resources, surged 0.1% to 76.7% in August. Overall capacity use for the industrial sector gained 0.2% to 76.4%. It is 3.2% below its 1972-2020 average.

Inflation seems to have peaked. A report from the Labor Department revealed import prices fell 0.3% last month after rising 0.4% in July. The first contraction since October 2020 lowered the year-on-year rise to 9.0% from 10.3% in July.

Remarkably, the consumer prices posted their smallest rise in seven months in August. Federal Reserve Chairman Jerome Powell has maintained that high inflation is short-lived.

Imported fuel prices dropped 2.3% last month after rising 3.0% in July. Petroleum prices fell 2.4%, whereas the cost of imported food advanced 0.6%.

Import prices, excluding fuel and food, declined by 0.2%. Core import prices increased 0.1% in July. Additionally, there were small increases in the prices of imported capital goods and consumer goods.