Industrial and manufacturing activity slowed in September, surprising economists to the downside.
Why it matters: Industrial production is one engine of economic output and provides a measure of demand for durable goods.
- But in this case, the blame for lower output appears to be supply-side problems — not lack of demand.
By the numbers: Industrial production in September was down 1.3%, after a 0.1% fall in August. That compares to consensus expectations for a 0.2% increase.
- Manufacturing output was down 0.76%, after a 0.4% fall in August. Expectations were for a 0.3% decline.
Reality check: “Most of the weakness in September reflected a 7.2% [month-over-month] drop in motor vehicle output, which was hardly a surprise given the widespread factory shutdowns, with much of that disruption looks set to last well into 2022,” wrote Capital Economics senior U.S. economist Michael Pearce in a research note.
- Broader shortages and backlogs at ports are also causing disruptions, with manufacturing excluding autos falling by just 0.3%, Pearce added.