Industrial Output Falls Unexpectedly Amid Supply Issues

Many economists had expected a small increase as factories recovered.

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WASHINGTON (AP) β€” U.S. industrial production fell 0.1% in December, the first decline since September, with manufacturers still struggling with snarled supply chains.

Many economists had expected a small increase in production last month as factories recovered.

Yet manufacturing output actually fell by 0.3%, with output at auto plants down 1.3%. Automakers have been hurt by supply chain problems, especially shortages of crucial computer chips.

Output from utilities fell 1.5% last month, reflecting unusually warm December weather reduced heating demand. Output from mining, which covers oil and gas production, was the only major category showing an increase, a gain of 2% last month.

Economists believe that industrial production will struggle to meet strong demand as long as problems affecting supply chains persist. There is concern that the surge in COVID-19 cases because of the omicron variant will result in shortages of factory workers, which could intensify supply chain problems.

β€œThe latest surge in cases looks to be exacerbating labor problems,” said Oren Klachkin, lead U.S. economist at Oxford Economics. β€œWhile we expect bottlenecks to eventually loosen, we shouldn't discount the risk that supply chain conditions could still worsen before they improve.”

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