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Economy

August Industrial Output Slows to 0.4% Gain After Ida Hits

September 15, 2021

WASHINGTON — U.S. industrial production slowed to a 0.4% gain in August as shutdowns of petroleum refineries and petrochemical plants caused by Hurricane Ida curbed manufacturing activity.

Plant closures long the Gulf Coast as well as lost oil production during last month's hurricane shaved 0.3 percentage points from output, the Federal Reserve reported Wednesday. Industrial output had risen a revised 0.8% in July.

Industrial production covers manufacturing, utilities and mining. For just manufacturing, factory output slowed to a tiny 0.2% gain, reflecting the hurricane impact and continuing supply chain problems. Factory output had risen a much stronger 1.6% in July.

Manufacturing has been hobbled this year due to snarled supply chains, particularly at auto plants where semiconductors needed for new cars have been in short supply.

Economists said problems, including labor shortages due to the resurgence of COVID-19 cases at home and abroad continue to depress manufacturing activity.

Andrew Hunter, senior U.S. economist at Capital Economics, said that a rising infection rates in Asia appeared to be a key reason that Ford and General Motors were forced to announce expanded plant shutdowns in September amid a worsening semiconductor shortage.

Ford, which has lost money in India for a decade, said this month that it was pulling the plug on production for good in the country. 

"The industrial recovery is losing steam and with the delta variant causing disruption to global supply chains and Hurricane Ida weighing on oil production, a further slowdown looks likely in September," Hunter said.

For August, output in auto plants was up a scant 0.1% after a much stronger 9.5% gain in July.

Output at the nation's utilities rose 3.3% in August due to unseasonably hot weather while output in mining was down 0.6%, reflecting a drop in crude oil extraction in the Gulf of Mexico due to Ida, which hit Louisiana on Aug. 29. 

The nation's factories, mines and utilities operated at 76.4% of capacity in August, up slightly from 76.2% in July.

With the 0.4% gain in industrial production in August, output is 5.9% higher than it was in August 2020 and 0.3% above its pre-pandemic level in February 2020.

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