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CROSS ASSET

Commodity-Tied Dollar Bloc Leads

JGBS

Cheaper On Wider Impetus

AUSSIE BONDS

YM Off Lows, Trouble Staying Offered In Wake Of GDP

FED

VIEW: BNP Paribas: Faster Tapering

US EURODLR FUTURES

Some Light Selling Seen

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The familiar theme of supply chain constraints underlined the weakness in September industrial production growth (-1.3% M/M, vs +0.1% M/M expected - in addition to a 0.5pp downward revision to August to -0.1%). Though Hurricane Ida fallout also played a role.

  • The report noted that motor vehicle and parts production dropped 7.2% "as shortages of semiconductors continued to hobble operations" (non-auto factory output fell 0.3%). The autos sector as a whole has seen sagging output for several months (see chart).
  • Meanwhile, utilities output fell 3.6% "as demand for cooling subsided after a warmer-than-usual August."
  • Mining production fell 2.3%: "the lingering effects of Hurricane Ida more than accounted for the drop in mining in September; they also contributed 0.3 percentage point to the drop in manufacturing. Overall, about 0.6 percentage point of the drop in total industrial production resulted from the impact of the hurricane."
  • Once again, output appears to have been stunted largely due to supply chain factors (and in this case, a natural disaster) rather than any unexpected factor or struggling demand, so the very disappointing figure vs consensus is being largely shrugged off by markets: Treasuries and the USD did not show any discernable reaction.

Source: Federal Reserve