Auto rebound fuels U.S. manufacturing output gain in March

Automotive-branded vehicles owned by General Motors Company are seen at a car dealership in Queens, New York, U.S., November 16, 2021. REUTERS/Andrew Kelly

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April 15 (Reuters) – A sharp rebound in auto production in March spurred a third straight monthly gain in U.S. factory activity, signaling perhaps the worst of the production problems that have plagued the auto industry over the past of the last year could be spent.

Overall industrial production rose 0.9% last month, matching the upwardly revised pace from February, the Federal Reserve said Friday. Economists polled by Reuters had forecast an acceleration in factory output of 0.4%. Production jumped 5.5% over the previous year.

Manufacturing, which accounts for 11.9% of the U.S. economy, has benefited from a shift in spending toward goods from services during the COVID-19 pandemic. But manufacturers have struggled to keep up with strong demand as labor markets have become extremely tight and supply bottlenecks have persisted due to COVID lockdowns in China and the war in Ukraine.

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The automotive sector has been particularly hard hit by supply issues, where production has been hampered for more than a year by a global shortage of electronic components, in particular the computer chips needed for the growing vehicle operating systems. more complex today.

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But U.S. production of motor vehicles and parts jumped 7.8% last month, the biggest increase since October, after a downwardly revised decline of 4.6% in February. The total number of car and light truck assemblies rose to nearly 9.5 million vehicles at a seasonally adjusted annual rate, the highest since January 2021, from 8.3 million the previous month.

“The auto industry is making a comeback,” Comerica Bank chief economist Bill Adams said in a note. “Production plunged in 2021 as chip shortages slowed factories. Now that’s reversing as automakers rise to the challenge and find ways to stretch their chip supplies.”

The resumption of production should further fuel a recovery in auto sales that have been held back by supply shortages, Adams said. Even if consumer spending shifts toward services in the coming months as the number of COVID cases declines, “vehicle sales have a better outlook this year than other consumer durables categories.”

“Given that last year’s sales were so constrained by the chip shortage, vehicle sales are much more constrained by supply than demand, and will therefore grow solidly in 2022 and 2023 despite rates ( interest rates) higher on auto loans and less fiscal stimulus support,” he said.

Overall capacity utilization in the industrial sector, a measure of the extent to which businesses are fully utilizing their resources, rose to 78.3% last month, the highest in more than three years, from 77.7% the previous month. last month. It is 1.2 percentage points lower than its 1972-2021 average.

Manufacturing capacity utilization rose to 78.7% in March, the highest level since 2007, from 78.1% in February.

Fed officials tend to look at capacity utilization measures to find out how much “slack” remains in the economy – how far can growth go before it becomes inflationary.

A separate report from the New York Federal Reserve showed on Friday that manufacturing activity in New York state accelerated in April, even as inflationary pressures continued to mount.

Its Empire State Manufacturing Index hit a four-month high of 24.6 after a negative reading of 11.8 in March. The survey’s price paid index hit a record high of 86.4 from 73.8 last month.

Optimism in the outlook faded, however, with the six-month outlook index falling to 15.2, the lowest in around two years, from 36.6 in March.

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Reporting by Dan Burns; edited by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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