By Lucia Mutikani

WASHINGTON (Reuters] – In September, U.S. production fell further than in any other month due to a continuing global shortage in semiconductors. The result is yet more evidence of economic growth being stifled by supply restrictions.

Last month’s manufacturing production was affected by Hurricane Ida’s lingering effects, which severely impacted output at the mines. Following data that revealed a strong rise in inflation last September, the Federal Reserve’s Monday report was also released. Although retail sales were up last month, this was due to higher prices of motor vehicles.

Michael Pearce is a Senior U.S. Economist at Capital Economics, New York. “While the weather and hurricane effects will diminish, labor and product scarcities are still getting worsening,” he said.

Last month’s manufacturing output fell 0.7%, which is the biggest decline since February. According to previously reported data, August’s production fell 0.4% rather than rising 0.2%. Reuters economists had predicted that manufacturing production would increase 0.1%.

Auto plant production fell by 7.2%, after falling 3.2% in August. Automakers are having to reduce production due to a global shortage in microchips. Port workers are also in short supply, which causes congestion and delays in the delivery of raw material.

Manufacturing output fell 0.3%, excluding autos. The Fed stated that the 0.3% drop in manufacturing output was due to the residual effects of Hurricane Ida which destroyed U.S. offshore energy production late in August.

Last month saw a 1.9% drop in consumer goods output due to sluggish auto and consumer product production. The output of primary metals, electric equipment, parts, electrical appliances, and furniture saw increases. Production of durable goods decreased 1.0%. This was accompanied by large declines in chemical, petroleum, or coal products.

Manufacturing grew by 5.3% overall in the third-quarter after growing at an average 5.0% rate during the previous quarter. Parts and motor vehicle production saw an 8.6% rise as the manufacturers stopped closing annual plants to retool over the summer in order to control their chip supply. Second quarter motor vehicle output fell by 24.6%.

SLOWER GROWTH

Due to the shortage of vehicles, inflation rose by causing very high prices in September and flattering retail sales. It is frustrating to try and rebuild inventories because of the dearth in automobiles. Economists predict that the combination of high inflation and moderate inventory growth will lead to a slowdown in economic growth during the third quarter.

Atlanta Fed estimates that the annualized growth in gross domestic products was 1.2% last quarter. 2.7% was the pace of economic growth in the second quarter.

Stocks in the USA were lower due to concerns over inflation. The dollar held steady in comparison to a range of currencies. U.S. Treasury Prices fell.

Combine the 1.3% decline in manufacturing output with 2.3% less mining activity and 3.6% lower utility usage to bring down industrial production. Following a dip of 0.1% in August, industrial output saw the biggest drop in seven years. The aftermath of Ida weighed on mining, and the demand for utilities declined after a warm August.

The July-September quarter saw industrial production rise at a rate of 4.3%. This was the fifth consecutive quarter with a minimum 4% increase.

In September, capacity utilization in the manufacturing sector, which is a measure how efficiently firms are using their resources to its fullest, dropped 0.6 percent to 75.9%. The industrial sector’s overall capacity usage fell by 1.0 percent to 75.2%. The average 1972-2025 capacity use is now at 4.4 percent.

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.