As the U.S. economy has continued to recover from the Covid-19 pandemic, many are watching to see just how much room the economy has to grow before growth becomes inflationary. After a slight dip in June, it seems that there is still a good amount of “slack” left based on the newest July reports.
According to new information released by the Federal Reserve on Tuesday, manufacturing output in the U.S. increased by 1.4% during the month of July. This came after a 0.3% decrease in June. Additionally, this increase is more than double the 0.6% increase anticipated by many experts.
Much of this increase came off of the back of auto production. Last month, auto production rose by a quite large 11.2%. As many auto manufacturers have had to grapple with production delays stemming from the ongoing semiconductor shortage, the Federal Reserve noted that “a number of vehicle manufacturers trimmed or canceled their typical July shutdowns” as they retooled reacted accordingly. Still, production of parts and completed vehicles were still 3.5% less than the recent January 2021 peak.
Excluding auto manufacturing, production output was still up 0.7%, with overall manufacturing 0.8% above its pre-pandemic levels. There is a strong domestic demand for new goods, which is propelling much of this new growth. At the same time, it’s also continuing to strain already-stretched supply chains, with many manufacturers still grappling with manpower and raw material shortages
There are also growing concerns about the Delta variant of Covid-19 potentially making the supply chain situation worse, and by extension hampering future production growth. While many in the U.S. have received Covid-19 vaccines, many other nations are still in the process of receiving and giving out their first doses. Outbreaks at key supply centers before these vaccines are administered could result in serious supply chain delays.