Manufacturing activity in the U.S. slowed as all industries reported higher prices for materials and record long-lead times, indicating that the supply chain disruptions continued to hold back the economy and fuel inflation.
The Institute for Supply Management said on Monday that its survey of manufacturers showed that manufacturers continued to face shortages and rising prices as the fourth quarter began.
The index for prices rose 4.5 points to 85.7, indicating that inflation was accelerating. The metrics of inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion, ISM’s Timothy Fiore said in a statement.
“All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products. Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential,” Fiore said.
There were some hints that surging prices and shortages were actually weighing down demand. The gauge of new orders fell to a 16-month low and was lower than expected. That could be due to some customers balking at higher prices or supply managers waiting to see if prices will retreat in coming weeks. And business to business intermediate orders–like big automakers putting order to auto parts suppliers –might be down because supply-chain problems have delayed deliveries or slowed manufacturing of final products.
Order backlogs fell 1.2 percent to 63.6 percent while supplier deliveries rose, suggesting some improvement in the supply chain traffic jams. The employment index rose, although Fiore said finding qualified employers was still a major challenge for many manufacturers.
“Global supply chain issues continue. Getting anything from China is near impossible — extreme delays. Microchip and circuit breaker shortages continue and are expected to continue into 2022,” a supply manager in the computer and electronics industry commented.
“My prediction is that 2022 will be very similar to 2021 — similar demand, constrained supply, restricted logistics and rampant inflation,” a manager in plastics and rubber said.
Twenty-eight commodities were in short-supply in October, up from 24 in September. Prices rose on 48 of the 49 commodities tracked by ISM. Only wood prices fell.
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