The Economy

Industrial Production Hit By Chip Supply Crunch

Total production rose 0.4% in June but factory output dipped 0.1% amid supply chain constraints, particularly in the auto sector.
Matthew HellerJuly 16, 2021

U.S. industrial production rose less than expected in June as supply shortages, particularly of computer chips for autos, continued to constrain manufacturing output.

The Federal Reserve reported that industrial production increased 0.4% last month after a 0.7% gain in May. Economists had expected a 0.6% rise in June.

Manufacturing output — the biggest component of industrial production — dipped 0.1% in June, driven by a sharp 6.6% decline in motor vehicle and parts production amid the current shortage of semiconductors.

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Excluding motor vehicles and parts, factory output increased 0.4%.

“The manufacturing sector continues to be hobbled by supply constraints,″ said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The highest profile example is the struggle by automakers to manage through a chip shortage.″

Utility output climbed 2.7% in June as Americans cranked up air conditioning to battle a heat wave across much of the country. Mining output rose 1.4% while oil and gas extraction increased 2.1%.

Tim Quinlan, senior economist at Wells Fargo, said there aren’t any signs yet that the supply-chain constraints or labor shortages hitting manufacturing activity are starting to ease.

“We could be experiencing a once in a lifetime boom in manufacturing in the U.S. if it weren’t for these supply-chain strains and labor-related problems,” he told MarketWatch.