Thu, 09 Dec 2021

WASHINGTON, D.C.: As the global semiconductor shortage continued to affect motor vehicle production, tumbling 7.2 percent in September after dropping 3.2 percent in August, production at U.S. auto plants has now fallen the most in the past seven months.

The global shortage of microchips is also forcing automakers to cut production, while the shortage of workers at ports is causing congestion and holding up the delivery of raw materials.

Additionally, the Federal Reserve Bank has reported how Hurricane Ida, which devastated U.S. offshore energy production in late August, contributed 0.3 percentage point to the drop in manufacturing output.

"While the hurricane disruption and weather effects will fade, labor and product shortages are still worsening, which will continue to weigh on manufacturing output over the coming months and quarters," said Michael Pearce, a senior U.S. economist at Capital Economics in New York, as reported by Reuters.

Also, manufacturing output dropped 0.7 percent last month, the largest decline since February.
Motor vehicle assembly fell to an annualized rate of 7.78 million units, the lowest since April 2020, from a pace of 8.82 million units in August.

"Supply issues limiting production will likely continue to limit consumption of autos, with latest industry guidance suggesting shortages could last well into 2022," said Veronica Clark, an economist at Citigroup in New York, according to Reuters.

With output of autos and consumer energy products tumbling, consumer goods production fell 1.9 percent last month. There were, however, increases in the production of primary metals and electrical equipment, appliances and components, as well as furniture and related products.

A shortage of motor vehicles helped to drive up inflation in September, through very high prices, and flat retail sales. The dearth of automobiles is also frustrating efforts to rebuild inventories.

"Perhaps a silver lining in this difficult supply environment today is that manufacturers will have plenty of work ahead of them once they are able to secure the inputs and help they need," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina, as reported by Reuters.

Labor and building material shortages are also impeding the housing market. A National Association of Home Builders survey on Monday indicated sentiment among single-family homebuilders rising in October, amid strong demand. But builders complained that "ongoing supply chain disruptions and labor shortages are delaying completion times and putting upward pressure on building material and home prices."

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