U.S. manufacturing output races to 2-1/2-year high

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FILE PHOTO: Workers mar the body structure with battery packs and front and rear sub frames while assembling electric vehicles at the Lucid Motors plant in Casa Grande, Arizona, US, September 28, 2021. Businesshala / Caitlin O’Hara
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WASHINGTON (Businesshala) – Production at US factories rose more than expected in October as the stretch from Hurricane Ida faded and automotive production picked up, but manufacturing remains hampered by shortages of raw materials and labor.

The Federal Reserve said on Tuesday that manufacturing output rose 1.2% last month to its highest level since March 2019, having fallen 0.7% in September. Economists polled by Businesshala had forecast a 0.7% increase in manufacturing output.

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Production increased by 4.5% as compared to October 2020. Manufacturing, which accounts for 12% of the US economy, is being underpinned by businesses desperate to rebuild lost inventories.

Spending on goods from services increased during the COVID-19 pandemic, putting pressure on global supply chains. Raw materials such as semiconductors are in short supply. There is also a labor shortage, which is hindering the delivery of materials to factories as well as the delivery of finished goods to markets.

Even as spending on rolling back services as well as coronavirus infections driven by the Delta variant eases, demand for goods remains strong.

Production at the auto plant rose 11.0% last month after declining for two consecutive months. Manufacturing output, excluding autos, grew 0.6 per cent in October.

Consumer goods production grew 1.4%. But the ongoing strike at John Deere resulted in a 1.3% drop in machinery production. Mining rebounded by 4.1% last month with a jump in manufacturing output and utilities up 1.2% to account for a 1.6% increase in industrial output. This was followed by a fall of 1.3 per cent in September.

Capacity utilization for the manufacturing sector, a measure of whether firms are fully utilizing their resources, rose 0.9 percentage points to 76.7% in October, the highest since January 2019. The total capacity utilization for the industrial sector rose to 76.4% from 75.2% in September. , This is 3.2 percentage points lower than its 1972-2020 average.

Fed officials look to measures of capacity utilization for signs of how “loosen” the economy remains – how far it has to walk for growth to happen before inflation happens.

Reporting by Lucia Muticani; Editing by Andrea Ricci

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