Storms, Semiconductor Shortages Depress Manufacturing

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best website builder Last month, many parts of the country were impacted by severe winter storms. Texas saw large sections of the state lose power, water, and effectively shut down as a result. Now, a new report by the Federal Reserve shows just what kind of impact these storms had on American manufacturing.

According to the Federal Reserve, manufacturing production fell by 3.1% in February. Economists had initially predicted that output would dip by just 0.1% for the month. This comes after a 1.2% increase in January and ends a nine-month increase in factory output levels. However, current levels still remain below pre-pandemic levels.

A large part of this decrease can be attributed to those severe winter storms. In Texas, which is the largest producer of oil and natural gas in the U.S., the weather meant that oil production and refineries had to shut down for extended periods of time. This had a ripple effect on manufacturers which are tied to the oil sector, limiting their output. The Federal Reserve said that if one excludes these weather-related impacts, then output fell by only 0.5%.

Additionally, the continuing shortage of semiconductors also created difficulties for some manufacturers. Auto manufacturing was one of the areas which had been hit the most, and it saw an 8.3% decline in February as a result of the shortage.

Despite the dip, manufacturing sentiment reached a three-year high during the month. This is due to how manufacturing continues to be supported by strong consumer demand for goods and leaner inventories. Currently, manufacturing makes up 11.9% of the U.S. economy, but it’s expected that there will be a shift to services, like airline travel and hotels, in the near future as more Americans receive Covid-19 vaccines and are able to travel and go out again.