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Chip Shortage Cuts into Industrial Production

Monday, October 18, 2021 11:31 AM | Neal Farmer
Chip Shortage Cuts into Industrial Production

Industrial Production and Capacity Utilization data came in significantly below estimates for the month of September.

Headline Data

Production dropped 1.3% compared to estimates for a 0.2% gain while data for August was also revised down from a 0.4% increase to 0.1% decrease. Additionally, utilization came in at 75.2% against the expected 76.5%, the prior month’s results were also revised downwards from 76.4% to 76.2%.

Biggest Factors

The biggest drop in September was in utilities where production fell 3.6% after rising 2.6% in August. Demand for air conditioning fell dramatically after a warmer than usual August.

Meanwhile, the most significant external factor came from Hurricane Ida that led to an estimated 0.3% drop in manufacturing output and 0.6% decrease in overall industrial production. The natural disaster also played a part in the 2.3% decline in mining production, which is how oil drilling gets categorized, after a smaller 0.9% fall the previous month.

Finally, the global chip shortage continued to wreak havoc on motor vehicles as assemblies fell 11.8% in September with the 7.2% decline in production of vehicles and parts driven by the current semiconductor shortage.

Third quarter wrap

Despite September's decline, Industrial production rose 4.6% for the third quarter, compared to the same quarter of 2020.

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