Similarly, the rate of capacity utilization — which measures the amount of industrial factory capacity that’s currently in use — was lower than expected at 75.2%. That’s the lowest level since April.
Still, this is bad news for third-quarter economic activity because “industrial production growth is closely tracking GDP growth in 2021, and likely 2022,” said Action Economics’ chief economist Mike Englund.
The aftermath of Hurricane Ida also contributed to the drop in manufacturing and drove a decline in mining. Nearly half of the total drop in September industrial production was due to the hurricane’s impact, the Fed said.
“Although strong demand has kept factory production elevated, manufacturers are struggling to keep up amid supply constraints,” said BMO Economist Priscilla Thiagamoorthy in a note to clients. “And, with the semiconductor shortage not expected to ease until next year, auto production will continue to weigh on the headline figure for some time.”