Production at American factories unexpectedly fell in late 2021, helped by a slowdown in auto manufacturing, which in turn was caused by ongoing semiconductor shortages.
Manufacturing output fell 0.3% in December, Reuters reported on Friday (January 14), after rising 0.6% the month before, according to figures from the US Federal Reserve. The news agency said economists it polled had forecast a 0.5% rise in factory output. However, production increased by 3.5% compared to December 2020.
The report notes that manufacturing — which accounts for just under 12% of the US economy — is still being supported by lean corporate inventories, thanks to strong demand for goods. However, the pandemic has stretched supply chains beyond their limits and helped fuel rising inflation, which has reached historic levels.
Continue reading: Inflation hits 7%, the highest level in 40 years
Inflation hit 7% this week, the highest since 1982, a month after hitting a 39-year high, according to the Bureau of Labor Statistics.
Auto plant production fell 1.3% in December after rising 1.7% in November. Motor vehicle production is around 6% below the previous year’s figure.
Last month, two automakers, Stellantis and BMW, announced measures to improve their supply of these critical components that enable today’s high-tech, connected vehicles. In the case of Stellatis, this meant partnering with electronics manufacturer Foxconn to develop and sell semiconductors for both Stellantis and third-party automotive customers.
See: Automakers announce agreements to improve supply of semiconductor chips
BMW, meanwhile, signed direct agreements with chip suppliers to secure millions of semiconductors and committed to working with suppliers in new ways and becoming more closely integrated into the supplier network.
Supply chain constraints have pushed up the cost of used cars and trucks and fueled inflation. In late 2021, vehicle valuation service Kelley Blue Book (KBB) reported that the median price for used vehicles had risen above $27,000 for the first time.