Factory Production in U.S. Declines Unexpectedly on Auto Output

Metal coils sit on the factory floor at the Toyota Motor manufacturing plant in Georgetown, Kentucky, U.S. (Photographer: Luke Sharrett/Bloomberg)

Factory Production in U.S. Declines Unexpectedly on Auto Output

Output at U.S. factories unexpectedly declined in June against a backdrop of persistent supply shortages, particularly at automakers, and soaring materials costs.

The 0.1% decrease followed a 0.9% gain in May, Federal Reserve data showed Thursday. Total industrial production, which also includes mining and utility output, climbed 0.4% in June after a revised 0.7% gain a month earlier.

Factory Production in U.S. Declines Unexpectedly on Auto Output

The median estimate in a Bloomberg survey of economists called for a 0.3% monthly increase in factory output and a 0.6% gain in industrial production.

While robust consumer spending and business investment are keeping factory order books full, production has been restrained by lean supplies of materials, shipping delays and a lack of skilled workers. The latest data show that the Fed’s index of factory output remains below pre-pandemic levels despite a sharp snapback in the economy.

Manufacturers are also grappling with higher input prices. The Labor Department said Wednesday that the core producer price index, which excludes food and fuel, climbed in June by the most in data back to 2010.

Survey data from two Fed districts earlier on Thursday were mixed. The New York Fed index of business activity climbed to a record high, while the Philadelphia Fed gauge of manufacturing in that region showed growth moderated.

Motor Vehicles

Production of motor vehicles slumped 6.6% last month after a 7.3% increase a month earlier. U.S. automakers have been constrained by a global chip shortage, resulting in lean inventory on dealer lots. Excluding autos and parts, manufacturing rose 0.4% after a 0.5% advance.

Factory output in the second quarter increased an annualized 3.7% despite a 22.5% rate of decline in motor vehicle and parts production, the Fed said.

Manufacturing capacity utilization, a measure of plant use, eased to 75.3%, while total industrial capacity edged up to 75.4%.

Digging Deeper

  • Utility output jumped 2.7% in June on greater demand for air conditioning; mining output increased 1.4%
  • Oil and gas well drilling rose 1.9% after a 4.3% gain
  • Factory output of primary metals, aerospace equipment and chemicals increased in June
  • Production of business equipment fell 0.6%, while output of construction supplies dropped 0.4%

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