WASHINGTON (Reuters] – U.S. factories saw more production in October than anticipated as Hurricane Ida was lifted and motor vehicle production increased. However, manufacturing remains constrained due to a lack of raw materials and labour.

The Federal Reserve announced Tuesday that manufacturing output jumped 1.2% to reach its highest point since March 2019 after it fell 0.7% in September. Reuters polled economists to forecast that manufacturing production would rise 0.7%.

The output increased by 4.5% in October 2020. The U.S.’s manufacturing sector accounts for 12 percent of its economy. Businesses want to rebuild their inventories.

Over the period of the COVID-19 epidemic, spending shifted from services to goods. This strains global supply chains. The supply of raw materials, such as semiconductors is limited. Also, it is difficult for workers to get materials to factories or to export finished goods to market because they are scarce.

Even though spending is shifting back to services due to the subsidence of coronavirus infections caused by the Delta variant, there’s still strong demand for goods.

After declining for the past two months, auto plant production rebounded by 11.0% in October. Manufacturing output increased 0.6% last October, excluding autos.

Consumption goods production rose 1.4%. However, machinery production fell 1.3% due to a strike at John Deere. (NYSE:). This month saw a jump in manufacturing production, as well as a 4.1% rise in mining output and an increase of 1.2% in utility costs. These factors combined helped boost industrial production to 1.6%. It followed September’s 1.3% decrease.

In October, capacity utilization in the manufacturing sector, which is a measure how efficiently firms use their resources to the maximum extent, rose by 0.9 percentage points to 76.7%. This was the highest increase since January 2019. From 75.2% in September, the overall capacity usage for industrial sectors rose to 76.4%. The average 1972-2020 figure is now 3.2 percentage points lower.

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.