(Reuters) – A strong rebound in U.S. automotive production in March led to a third consecutive month of growth in U.S. manufacturing activity. This may indicate that the worst of the problems in the industry’s motor vehicle sector over the past year might have been resolved.

According to the Federal Reserve, overall industrial production increased by 0.9% last month. This was in line with February’s revised upwardly adjusted pace. Reuters polled economists and forecast that factory production would accelerate 0.4%. The output climbed 5.5% compared to a year ago.

The shift from goods to services spending during the COVID-19 epidemic has helped the American manufacturing sector, which makes up 11.9% of its economy. Manufacturers are struggling to meet the high demand, while labor markets have been extremely tight. Supply bottlenecks also persist due to COVID-19 Lockdowns in China.

The automotive sector has been especially hard hit by shortages. Production has been affected for over a year due to a worldwide shortage of electronic parts, particularly the chips required for the complex operating systems in today’s vehicles.

Graphic: U.S. auto production rebounded in March https://graphics.reuters.com/USA-ECONOMY/akpezjdyjvr/chart.png

U.S. auto parts and motor vehicle production increased by 7.8% in October. It was the highest increase since October. The total assembly of light and heavy trucks increased to almost 9.5 million units at an annual seasonally adjusted rate. This is the most significant increase since January 2021. It was 8.3 million in February.

The overall industrial sector capacity utilization (a measure of how efficiently companies use their resources) rose to 78.3% in the last month. This is the highest level since at least three years and a significant increase from the 77.7% recorded the previous month. The average 1972-2021 figure is just 1.2 percentage point lower.

In March, capacity utilization for the manufacturing sector rose to 78.7%. It is now the highest since February 2007, when it was 78.1%.

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.

The New York Federal Reserve released a separate report on Friday that showed New York’s manufacturing activity accelerated in April despite inflationary pressures.

After a March reading of negative 11.8, the Empire State Manufacturing Index climbed to 24.6 in April. This month’s survey saw a record 86.4 increase in the prices paid index, compared to 73.8.

The outlook outlook was less optimistic than it had been in March, when the index dropped to 15.2, down from 36.6 in March.