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According to Reuters, due to a global shortage of semiconductors and a decline in auto production, the US factory output unexpectedly dropped in June.

The Federal Reserve said on Thursday that manufacturing output fell 0.1% in June. Economists had previously predicted to Reuters that manufacturing output in June would increase by 0.2%, and factory output in the second quarter would increase at an annual rate of 3.7%, compared with an increase of 2.3% in the previous quarter.

The manufacturing industry, which accounts for 11.9% of the US economy, is supported by large-scale fiscal stimulus, low interest rates, and continued strong demand for goods as spending shifts to services. At least 160 million Americans have been vaccinated against COVID-19, which has increased spending on travel-related services and dining out.

The strong demand for goods is putting pressure on the supply chain, making manufacturers struggling to cope with shortages of raw materials and labor. The output of the auto factory fell by 6.6% last month. Production cuts have boosted demand for used cars and trucks, which have been the main driver of consumer inflation in recent months.

In the second quarter, auto and parts production contracted by 22.5%. Excluding automobiles, manufacturing output rose 0.4% in June. Last month, the decline in overall manufacturing output was offset by a 1.4% jump in mining and a 2.7% rebound in utilities, and industrial output increased by 0.4%.