July 3, 2022

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US manufacturing activity is declining but supply barriers are easing -IHS

Mask factory in La Vern, California, USA

WASHINGTON (Reuters) – US manufacturing activity fell to a one-year low in December, but there are signs of easing restrictions on the supply of labor and raw materials to factories.

Data firm IHS Markit on Thursday said its Initial Purchasing Managers’ Index (PMI) for the US manufacturing sector fell to 57.8 in mid-December from 58.3 in mid-December. This is the lowest level since December 2020.

Measures above 50 indicate expansion of the manufacturing sector, which accounts for 12% of the US economy.

According to a Reuters poll, economists expect the index to rise to 58.5.

Production is supported by a strong demand for goods and companies’ very low inventory. But the supply chains affected by the Govit-19 epidemic remain a stumbling block.

However, there are drops of hope. The survey showed that “supply chain delays during the month are significantly moderate” and that “the job creation rate has increased the most rapidly since June”. “Expenditure inflation has fallen to its slowest pace in seven months,” the survey said.

But the shortage persisted for the wider service sector. The service sector’s benchmark BMI fell to 57.5 from 58.0 in November. According to economists voted by Reuters, the services sector, which accounts for two-thirds of US economic activity, is valued at 58.5.

The survey measurement of prices paid by service companies rose to 77.4, the highest since the beginning of the 2009 timeline and 75.7 in November. This is a possible indication that inflation will be significantly higher for some time to come. Consumer prices have risen sharply since November 1982 compared to the same period last year.

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Business activity generally slowed this month as activity in the manufacturing and service sectors slowed. The initial reading of the combined PMI index for the survey fell to 56.9, up from 57.2 in November.

The survey’s price paid by companies rose to 78.1, the highest level since measurements began in 2009, and continued to read 77.6 in November.

(By Lucia Muttigani)

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