Industrial output falls 0.1% unexpectedly amid supply issues

Business

FILE – Model year 2021 Ford Ranger trucks on the assembly line at Michigan Assembly, Monday, June 14, 2021, in Wayne, Mich. U.S. industrial production increased 0.5% in November 2021 as output at the nation’s factories reached the highest level since January 2019.(AP Photo/Carlos Osorio)

WASHINGTON (AP) — U.S. industrial production fell 0.1% in December, the first decline since September, with manufacturers still struggling with snarled supply chains.

Many economists had expected a small increase in production last month as factories recovered.

Yet manufacturing output actually fell by 0.3%, with output at auto plants down 1.3%. Automakers have been hurt by supply chain problems, especially shortages of crucial computer chips.

Output from utilities fell 1.5% last month, reflecting unusually warm December weather reduced heating demand. Output from mining, which covers oil and gas production, was the only major category showing an increase, a gain of 2% last month.

Economists believe that industrial production will struggle to meet strong demand as long as problems affecting supply chains persist. There is concern that the surge in COVID-19 cases because of the omicron variant will result in shortages of factory workers, which could intensify supply chain problems.

“The latest surge in cases looks to be exacerbating labor problems,” said Oren Klachkin, lead U.S. economist at Oxford Economics. “While we expect bottlenecks to eventually loosen, we shouldn’t discount the risk that supply chain conditions could still worsen before they improve.”

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