U.S. factory output dips 0.1% in June on auto chip shortage

Finance and Business

Model year 2021 Ford Ranger trucks on the assembly line at Michigan Assembly, Monday, June 14, 2021, in Wayne, Mich. Surging output of cars, trucks and auto parts pulled U.S. factory production up 0.9% in May. Adding utilities and mines, overall U.S. industrial production climbed 0.8% in May from April, the Federal Reserve reported Tuesday. (AP Photo/Carlos Osorio)

WASHINGTON (AP) — U.S. factory output slid last month as a shortage of computer chips disrupted auto production.

Manufacturing production dipped 0.1% in June — third drop in five months, the Federal Reserve reported Thursday.

Overall, industrial production — including output at factories, mines and utilities — rose 0.4% last month after increasing 0.7% in May. Industrial output is up 9.8% from a year earlier.

The chip shortage pushed production of cars, trucks and auto parts down 6.6% in June. Excluding autos, industrial production rose 0.4% last month.

“The manufacturing sector continues to be hobbled by supply constraints,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The highest profile example is the struggle by automakers to manage through a chip shortage.”

Utility output climbed 2.7% in June as Americans cranked up the air conditioning to battle a heat wave across much of the country. Mining output rose 1.4% on an uptick in oil and gas production.

American industry has been bustling as the coronavirus threat recedes, despite a shortage of workers and trouble getting supplies in time. The Institute for Supply Management, an association of purchasing managers, reported that its manufacturing ticked slightly lower last month compared to May.

But it still came in at 60.6 on a scale where anything above 50 signals growth. Still, factory hiring shrank, ISM found, largely because manufacturers are struggling to fill job openings as the economy rebounds with unexpected speed from the coronavirus recession.

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