US: Supply constraints to hold back the recovery in manufacturing – CE

Industrial production in the US expanded 0.7% in April, below the 1% of market consensus. Analysts at Capital Economics, point out the recovery in output is still badly lagging consumption and, with shortages become more broad-based, that situation will get worse in the coming months.

Key Quotes:

“Manufacturing output increased by a modest 0.4% m/m in April but was held back by a 4.3% m/m drop back in motor vehicle production, as the global shortage of semiconductors really began to bite.”

“The shortages now extend well beyond just semiconductors, and include raw materials, other intermediate inputs and, based on the very elevated job openings rate for manufacturing, labour too. The upshot is that we expect those broader supply constraints to hold back the recovery in manufacturing output this year.”

“Industrial production increased by a slightly stronger 0.7% m/m in April, as mining output rose by 0.7% m/m and utilities output recorded a weather-related 2.6% m/m rebound to more normal levels. Overall, the recovery in output is still badly lagging consumption and, with shortages become more acute and broad-based, that situation is only going to get worse in the coming months.”