U.S. manufacturing output unexpectedly falls in December on autos

BY Reuters | ECONOMIC | 01/14/22 09:52 AM EST

WASHINGTON (Reuters) - Production at U.S. factories unexpectedly fell in December, pulled down by a decline in output at motor vehicle plants amid an ongoing global semiconductor shortage.

Manufacturing output dropped 0.3% last month after increasing 0.6% in November, the Federal Reserve said on Friday. Economists polled by Reuters had forecast factory production rising 0.5%. Output increased 3.5% compared to December 2020.

Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by lean inventories at businesses as demand for goods remains strong. But COVID-19 and the recovery from the pandemic have overstretched supply chains, igniting inflation.

Manufacturing production increased at a 4.9% annualized rate in the fourth quarter after rising at a 4.0% rate in the July-September quarter.

Production at auto plants dropped 1.3% last month after rising 1.7% in November. Motor vehicle output is about 6% below its year-earlier level.

Last month's decline in manufacturing output combined with a 1.5% decline in utilities to push industrial production down 0.1%. That followed a 0.7% gain in November. Utilities were undercut by unseasonably warm weather in December, which lessened demand for heating.

Mining production rose 2.0%. Industrial production grew at a 4.0% rate in the fourth quarter. That followed a 3.5% pace of increase in the third quarter.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, decreased 0.2 percentage point to 77.0% in December. Overall capacity use for the industrial sector slipped 0.1 percentage point to 76.5% last month. It is 3.1 percentage points below its 1972-2020 average.

Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy - how far growth has room to run before it becomes inflationary.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article