The impact of Hurricane Ida continued to be a drag on industrial production in September, accounting for a significant drop not only in mining but also in manufacturing output.
Overall industrial production fell by 1.3% in September compared to August, with 0.6 percentage points of the drop resulting from the impact of the hurricane, according to a Federal Reserve report released on Monday.
It was the second straight month that the overall output declined; August’s figure was revised down from an increase of 0.4% to a decrease of 0.1%.
Categories heavily affected by the hurricane, including petroleum products and chemical manufacturing, led the decline in manufacturing production and were down by 2.4% and 2.1%, respectively, on the month.
Production of automobiles and parts was down by 7.2% in September, continuing its declining trend since July, which saw an unusual jump with the cancellation of seasonal factory shutdowns.
The sector has been struggling for months because of a shortage of chips as well as the compounding effect of the labor shortage, all of which prompted major producers like Ford and Toyota to cut production in recent months.
Outside of automobiles and parts, the production of other durables rose by 0.5% on the month.
Capacity utilization for manufacturing, a measure of plant use, decreased by 0.6% in September to 75.9%. This rate remained below the long-run average for the manufacturing group.
The output of utilities, the other major group, fell by 2.3% in September after a sharp increase of 2.6% because of a warmer-than-usual August.
Despite the one-time shock from the hurricane, on a year-over-year basis, overall industrial production increased by 4.6%, while manufacturing output rose by 4.8%
The takeaway
With the hurricane now in the past, we expect production output to rise in the coming months. But the shortages of labor and the persistent supply chain issues will continue to cause production output to lag behind strong demand for industrial goods.
