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Auto makers and parts makers experienced a steepening production decline in September with the sharpest drop in output since May of last year IHS Markit's PMI surveys showed. Supply delays, which rose to unprecedented levels in September.

Global PMI Sep 2021 Delays

Supply delays have risen to unprecedented levels in September leading to a marked shortfall of production relative to orders. IHS Markit's PMI surveys showed business expectations revived in the global auto sector, both supply chains and inflows of new orders. These deteriorated in September and will need to be closely watched for signs of whether this optimism will translate into higher production.

Global PMI Sep 2021 Auto sector

Besides the downturn seen in the height of the initial pandemic outbreak last year, the latest decline in auto production was the steepest in the 12-year history of global sector PMI data availability. - IHS Markit

Of the 26 sectors covered by IHS Markit's global sector PMI, the auto sector downturn in September stands out as being the only major contraction of any sector. The only other sector to report a decline in business activity was insurance, where only a marginal decline was observed. The September drop in auto production was also notable in representing by far the biggest underperformance of the sector relative to all manufacturing seen over the 12-year history of the global PMI sector data.

Global PMI Sep 2021 New Order minus Output

The chip shortage is causing a shake-up in America’s automotive ranks. For the second quarter, Toyota Motor was the best-selling automaker in the U.S., ousting General Motors.

Backlogs Rise at Fastest Rate in 10 years

Despite easing in September, the new orders index for the global auto sector remains considerably higher than the output index, albeit the gap narrowing somewhat from the all-time high seen in August.

Global PMI Sep 2021 Backlogs

Ford Warned in The First Quarter on The Chip Shortage. Overall, Ford now expects to lose about 1.1 mln units of production this year to the semiconductor shortage.  Ford maintained its full year adjusted EBIT guidance at $5.5-6.5 bln, including an adverse effect of about $2.5 bln from the chip issue.

Ford expected Q2 will be the trough as it expects the flow of semiconductors from the Japan supplier to resume by the end of Q2.  Ford still is aware that the broader global semiconductor shortage may not be fully resolved until 2022. 

Global PMI Sep 2021 New Orders

Source: Ford, IHS Markit

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