WASHINGTON, (Reuters) – U.S. factory production increased modestly in January, as the motor vehicle output dropped for the second consecutive month due to a global shortage of semiconductors.

The Federal Reserve announced Wednesday that manufacturing output increased 0.2% in January after dropping 0.1% in December. Reuters polled economists to predict factory production recovering 0.3%. Production rose 2.5% in January 2021 compared with January 2021.

Other manufacturing sectors have been affected by shortages of raw materials, as well as the automobile industry.

While spending shifted to services from goods during the COVID-19 epidemic, the manufacturers struggled with a severe shortage of workers in factories, which was caused by the coronavirus.

As long as there is strong demand for products, manufacturing, which makes up 11.9% of America’s economy, continues to be supported by still-lean inventories.

Auto plant production fell 0.9% after falling 0.4% in December. Manufacturing rose 0.3% in January, excluding motor vehicles.

Combine the record 9.9% increase in utilities with the gain in manufacturing output to lift industrial production 1.4%. This was after a December 0.1% drop.

In January, freezing temperatures helped to increase utility demand. With mining output increasing 1.0% and oil-and gas well drilling rising 6.2%, the country saw an increase in utility demand.

The manufacturing sector’s capacity utilization, which measures how well firms use their resources in a given time, increased by 0.1 percentage points to 77.3% in Jan. Although it is now 1.8 percentages higher than the pre-pandemic average but still below its long-term average of 0.8 percent, this number remains low.

Last month, the overall industrial sector capacity usage increased by 1.0 percentage points to 77.6%. This is just 1.9 percentage points lower than the average for 1972-2021.

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.