A prolonged and expanded version of the United Auto Workers strike that began Friday could pose significant production challenges for a U.S. industrial economy that is still recovering from pandemic-fueled supply chain disruptions, according to analysts at Oxford Economics.

The quest to recover from global supply bottlenecks, which hit the auto industry especially hard, has spurred numerous industrial development projects nationwide aimed at boosting domestic production of items including computer chips, electric vehicles and EV batteries.

The latest Commerce Department data showed overall U.S. manufacturing output rose in August by a slim 0.1% from the prior month, and Oxford researchers noted output was held back largely by a 5% drop in motor vehicle production. Overall U.S. factory production has been generally stagnant for the past year amid declining consumer demand, high interest rates and other inflationary concerns.

Oxford Lead U.S. Economist Michael Pearce said a more serious slowdown could occur if the first union strike against all three major U.S. automakers extends beyond the nearly 13,000 UAW workers who walked off the job early Friday at three plants in Michigan, Ohio and Missouri. The union represents a total of about 145,000 workers at Ford, General Motors and Stellantis, with pickets underway nationwide.

Autoworkers are seeking higher pay, a four-day work week and restoration of pension benefits that were rescinded during the Great Recession.

“We estimate a total walkout would reduce motor vehicle output by over 30%, which will begin to show up in the September [industrial output] report,” Pearce said in a statement. “Another key risk is that disruption reverses the improvement in auto supply chains and puts renewed upward pressure on vehicle prices.”

A previous report by consulting firm Anderson Economic Group estimated an auto strike could cost the larger U.S. economy more than $5 billion in a span of just 10 days. That includes revenue and wage losses for automakers, suppliers and other support businesses that depend on auto manufacturing. 

Preliminary numbers showed the university’s overall index of consumer sentiment at 67.7, generally reflecting the percentage of respondents with favorable views of their household finances and the larger economy. The number was below August’s 69.5 reading but higher than the 58.6 figure for September 2022.

Joanne Hsu, the university’s director of consumer surveys, said respondents showed modest improvements in their expectations for short-run and long-run economic conditions. Changes could result from events including a potential federal government shutdown over debt-ceiling debates.

“So far, few consumers mentioned the potential federal government shutdown, but if the shutdown comes to bear, consumer views on the economy will likely slide, as was the case just a few months ago when the debt ceiling neared a breach,” Hsu said in a statement Sept. 15.

Hsu said consumers’ year-ahead inflation expectations moderated from an average of 3.5% last month to 3.1% this month. The government recently reported that the annual inflation rate was 3.7% in August, up from 3.2% in July but well below last summer’s rates around 9%.

Mortgage rates ticked back up after a brief period of declines in the latest weekly lender survey by Freddie Mac, remaining around 20-year highs at more than 7% for 30-year loans.

The government-backed lending agency said 30-year, fixed-rate mortgages averaged 7.18% in the week that ended Sept. 14, up from 7.12% in the prior week and above the 6.02% average in the comparable week of 2022. The average 15-year, fixed-rate loans was 6.51%, down slightly from the previous week’s 6.52% average but well above the year-earlier average of 5.21%.

“The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated,” Freddie Mac Chief Economist Sam Khater said in a statement. “However, potential homebuyers can still benefit during these times of high mortgage rates by shopping around for the best rate quote.”

Many prospective homebuyers including apartment renters have stayed on the sidelines, keeping multifamily demand high in many regions. Khater said a wide range of rate offerings by lenders mean those buyers could pay between $600 and $1,200 less annually if they apply for mortgages from multiple lenders.