- A rebound in automotive production drove a third consecutive monthly gain in U.S. factory activity
- On April 16, the Federal Reserve said that last month, overall industrial production increased 0.9 percent
- Manufacturing, which accounts for 11.9 percent of the U.S. economy, has benefited from a shift in spending from services to goods during the COVID-19 pandemic
WASHINGTON D.C.: Signaling that the worst of the production struggles that stifled the motor vehicle industry over the last year could have passed in March, a rebound in automotive production drove a third consecutive monthly gain in U.S. factory activity.
On April 16, the Federal Reserve said that last month, overall industrial production increased 0.9 percent, keeping pace with February’s upwardly revised figures, while economists polled by Reuters forecasted factory production to accelerate by 0.4 percent, as output jumped 5.5 percent from one year ago.
Manufacturing, which accounts for 11.9 percent of the U.S. economy, has benefited from a shift in spending from services to goods during the COVID-19 pandemic, but manufacturers have struggled to keep pace with the strong demand.
Labor markets have also become extraordinarily tight, while supply bottlenecks have continued due to China’s COVID-19 lockdowns and Russia’s invasion of Ukraine.
Due to a global shortage of electronic components, especially computer chips that are required for complex modern vehicle operating systems, the automotive sector has been hit especially hard.
However, last month, U.S. motor vehicle and parts production surged by 7.8 percent, the largest increase since October, and the total production of cars and light trucks increased to nearly 9.5 million vehicles at a seasonally adjusted annual rate, the highest since January 2021, up from 8.3 million in the previous month.
“The auto industry is making a comeback,” wrote Bill Adams, chief economist for Comerica Bank, adding that the production recovery should further fuel a pickup in auto sales that have been held back by supply shortages.
“Since sales last year were held back so much by the chip shortage, vehicle sales are constrained much more by supply than demand, and so will grow solidly in 2022 and 2023, despite higher interest rates on car loans and less support from fiscal stimulus,” he added.
Last month, overall industrial sector capacity utilization, a measure of how fully companies are using their resources, climbed 78.3 percent from 77.7 percent the month before, the highest in more than three years.
