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Industrial production in the United States slumped in November with “broad based” decreases, the Federal Reserve said Thursday, as output for bigger-ticket consumer products and manufacturing fell. online news
While tangled supply chains and surging costs which weighed on businesses are easing, in a boost to production, firms are now contending with weakening demand as interest rates rise.
The Fed has raised its benchmark lending rate seven times this year in an effort to cool the world’s biggest economy, making borrowing more expensive with policy effects rippling across sectors.
Total output dropped 0.2 percent in November, defying analysts’ expectations of an uptick, according to Fed data.
“Decreases were broad based across market groups,” the report said.
It added that the output of consumer durables fell about two percent, referring to products that do not have to be purchased very often. The decline was led by automotive goods.
Manufacturing output dropped 0.6 percent as well, while that of mining fell 0.7 percent, only partly offset by a rebound in utilities, the Fed added.
“Headline production was flattered by a weather-related… jump in utilities output, which is hugely volatile,” said economist Kieran Clancy of Pantheon Macroeconomics in a note.
The main factor bogging down manufacturing output is likely “softening capital spending, in the wake of higher borrowing costs,” he added.
“The next few months will be rough; the downturn in manufacturing output has further to run,” he said.
On Thursday, the New York Federal Reserve Bank’s Empire survey also saw a plunge in readings, with shipments and new orders worsening, analysts noted.
“Manufacturing conditions in the US are deteriorating as central banks continue to raise rates and the global economy weakens,” said economist Gurleen Chadha of Oxford Economics.
bys/bgs
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economy online news
Notes from APS Radio News
According to a number of economists, lockdowns and restrictions caused shortages of some goods and shortages.
During the period of lockdowns, major central banks like the US Federal Reserve, the European Central Bank and the Bank of Japan engaged in massive infusions of money.
Starting in the early part of March 2020, the Federal Reserve embarked on monetary expansion.
Between the early part of March of 2020 to May of this year, the Federal Reserve added about $4.8 trillion to its holdings.
It did so by purchasing billions of dollars’ worth of Treasury bonds and government bonds each month during that period.
According to analysts and economists, the combination of monetary expansion and expansive fiscal policy and lockdowns caused higher rates of inflation, even before sanctions were imposed over Russia’s invasion of Ukraine.
Lockdowns were impemented over a virus that, in the US, has had an average mortality rate of .07%, according to Statista, and that has had a recovery rate of 99% for most age groups.
Dr. John Ioannidis, a research scientist at Stanford University and whose specialty is evidence-based medicine, outlined infection fatality rates as a function of age groups:
“The real-world risk of dying from COVID-19 based on published data from the Irish census bureau and the central statistics office for 2020 and 2021 is as follows: For people under 70, the death rate was 0.014%; under 50 years of age, it was 0.002%, which equates to a 1 in 50,000 risk, or about the same as dying from fire or smoke inhalation. Under 25 years of age, the mortality rate was 0.00018%, or 1 in 500,000 risk of dying from COVID-19.”
