U.S. Industrial Production Increased in June, But Manufacturing Acted as a Drag

U.S. industrial production rose in June but manufacturing output continued to be hindered by supply shortages, particularly in the automotive sector.

Industrial production--which includes factory, mining and utility output--increased at a seasonally adjusted 0.4% in June compared with May, according to data from the Federal Reserve released Thursday. The reading missed forecasts from economists polled by The Wall Street Journal, who expected a 0.6% rise.

Industrial output rose 0.7% in May, down from the 0.8% previously estimated.

Manufacturing output--the biggest component of industrial production--dropped by a marginal 0.1% in June compared with the previous month, driven by a sharp 6.6% decline in motor vehicle and parts production amid the current shortage of semiconductors.

Excluding motor vehicles and parts, factory output increased 0.4%, the Fed said. Declines of more than 1% were registered by nonmetallic mineral products and by electrical equipment, appliances and components, it said.

While demand for goods is set to remain strong in the next months, there aren't any signs yet that the current supply- chain constraints or labor shortages hitting manufacturing activity are starting to ease, said Tim Quinlan, senior economist at Wells Fargo.

The current demand and supply imbalance makes it difficult for factories to keep up with orders, restraining potential output. "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," Mr. Quinlan said.

Utilities output increased 2.7% in June as demand for air conditioning increased amid the heat wave registered in parts of the country during the month. Mining output rose 1.4%, the Fed said.

Industrial production in June was 9.8% above the same month a year earlier, but 1.2% below pre-pandemic levels.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, increased to 75.4% in June. Economists expected a 75.7% reading. Capacity utilization for manufacturing fell by 0.1 percentage points to 75.3%.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

  (END) Dow Jones Newswires
  07-15-21 0956ET
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