WASHINGTON, (Reuters) – Although new orders for U.S. made goods unexpectedly rose during September, manufacturing continues to be constrained due to input shortages.

On Wednesday, the Commerce Department reported that September saw a 0.2% increase in factory orders. According to previously reported data, orders rose 1.0% in August instead of 1.2%. Reuters economists had predicted factory orders to remain unchanged, according to Reuters. The year-over-year increase in orders was 17.6%

Manufacturing accounts for 12 percent of the economy. However, there is still strong demand for products despite shifting spending to services. While businesses are rebuilding inventories due to low demand, shortages in labor and raw material from the COVID-19 epidemic remain challenges.

Economic growth was slowed by widespread shortages in the third quarter, its lowest pace for more than one year.

A survey by the Institute for Supply Management on Monday revealed that manufacturing activity was slowing in October. All industries reported record-long lead time for raw material.

In September, machinery, primary and fabricated metal products led the rise in orders for factory goods. The global shortage of chip technology likely caused a decline in orders for computer and electronic products and transportation equipment.

After gaining 0.1% last August, shipments rose 0.6%. In September, inventories at factories jumped 0.8%. Factory orders not filled rose 0.7% in September, after increasing 0.9% by August.

According to the Commerce Department, orders for non-defense capital items, which exclude aircraft, rose 0.8% last month.

This suggests that there could be a rebound in equipment spending after the sector contracted in the third quarter. However, inflation could reduce the gains.

As previously reported, the 1.4% increase in shipment of core capital goods (which are used for calculating business equipment expenditures in GDP reports) was 1.4%.