January saw U.S factories increasing their productions suggesting that manufacturers are slowly working through labor and material shortages induced by the pandemic that affected output in previous months.
Federal Reserve data on Wednesday showed an increase of 0.2 % in January compared to a decline of 0.1% in December. The surge in heating demand ensured a jump of 1.4% of total Industrial output that included utility and mining output in January, the highest in three months.
As per an economist’s survey in Bloomberg, the median estimates called for a 0.5 % increase in total industrial output and a 0.2% increase in factory production. According to Federal Reserve, the colder than usual temperature resulted in a utility to record 9.9%.
The figures last month point out solid demand for the goods sector, which is the key to U.S. economic recovery. This is around when this sector grapples with chip shortages and employees and labor absence due to the pandemic. The slight easing of constraints in the supply chain and capacity utilization also helped to boost the plant output.
Economists Kathy Bostjancic and Oren Klachkin said in a note that the most important questions about how fast the industrial sector overcome the hiring and supply chain headwinds, and even if the virus disappeared utterly, restoring supply chains to restore average level would not happen instantly.
Last month factory output was mixed. The production in petroleum and auto products declined, while excellent gains were seen in the electrical equipment and machinery segment.
The auto industry suffered from a shortage of computer chips during the pandemic. Except for this sector, the rest of the factory output rose by 0.3% in January.
While the factory’s capacity utilization increased to 77.3% in January, the total industrial output rose to 77.6%, which was the highest since February 2019, according to a report from Federal Reserve.
Earlier in February, data supplied by the Institute of Supply Management indicated that the time taken for delivery of equipment and raw materials has shortened. This points towards some improvement in capacity constraints. However, Manufacturers continue to face pressures from mounting inflations. According to a report from the Labor Department on Tuesday, the wholesale prices rose by 9.7% in January compared to the same period a year back, which is a near-record.
