Industrial Production Moderates in August

Industrial Production Moderates in August

*Industrial production moderated in August rising 0.4% m/m and 5.9% yr/yr (Chart 1), while July’s increase was revised down to 0.8% reflecting supply constraints that have curtailed production and the Delta variant’s impact on demand for goods. Despite moderation in the pace of industrial production growth, August marked the first month in which the level of industrial production surpassed that in February of 2020, and the second consecutive month in which manufacturing was above its February 2020 level. August’s data suggests the brunt of the Delta variant’s impact on economic activity has fallen on the service sector, with goods demand showing underlying strength.

*Consumer goods production rose 0.9%, driven by increases in the production of non-durable consumer goods and energy which rose 1% and 2.5%, respectively (Chart 2). Durable consumer goods production moderated, increasing 0.3% after a 5% increase in July, bolstered by a 0.8% increase in home electronics production.

*Motor vehicle and parts production flattened rising 0.1% m/m, with motor vehicle production contracting 0.3%, while parts production rose 0.4% (Chart 3). Motor vehicle production remains well below its pre-pandemic levels, reflecting ongoing semiconductor shortages and supply chain disruptions that anecdotal evidence suggest will persist into 2022.

*Among the industrial groups, business equipment production rose 0.5%, although production of industrial and other equipment was flat. Materials production flattened and is below its level in February 2020.

Chart 1: Industrial Production Index

Chart 2: Industrial Product Index (Consumer Goods)

Chart 3: Industrial Production Index (Motor Vehicles)

Mickey Levy, mickey.levy@berenberg-us.com

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