U.S. manufacturing activity moderates in December; supply constraints ebbing-ISM -Breaking
WASHINGTON (Reuters] – U.S. Manufacturing slowed in December because of a cooling in goods demand, but supply restrictions are improving and a measure that measures prices paid by factories for inputs fell the most since mid 2020, when the pandemic interrupted economic activity.
According to the Institute for Supply Management, Tuesday’s reading for its national factory activity index was 58.7. This was the lowest reading since January last year, and it followed 61.1 in November.
An index reading higher than 50 means that there has been an increase in the manufacturing sector, which is 11.9% of America’s economy. Reuters polled economists and predicted that the index will fall to 60.1.
From 72.2 in November, the ISM survey measured supplier deliveries at 64.9. If the reading is higher than 50%, it indicates that factories are receiving slower deliveries.
As global economies recovered from the COVID-19 Pandemic, raw materials were in limited supply. The shift to services from goods early in the pandemic has also contributed to shortages. Millions of people are still unable to move and produce raw materials.
There are signs that inflation may soon slow down, based on the improvement in supply chain conditions.
According to the survey, the measure of manufacturers’ prices fell to 68.2 in December, a drop that is unprecedented since November 2020 when it was 82.4. It was the greatest drop since March 2020, when nonessential businesses had to be closed in order to stop the outbreak of coronavirus.
The Federal Reserve has long held the view that this current time of high inflation is temporary. This inflation rate is much higher than that of the U.S. central banking’s flexible 2% target.
ISM Survey’s forward-looking index for new orders fell to 60.4 in December, a drop of 61.5 from November. The decline in new order growth may be temporary, or even limited due to the low levels of customer inventories.
More workers were hired by factories. The eight-month record for manufacturing jobs was reached. These numbers, along with the very low number of first-time unemployment benefit applications, suggest that December saw job growth accelerate.
A preliminary Reuters Survey of Economists found that the nonfarm payrolls rose by 400,000 jobs in December following a rise of 210,000 in November. On Friday, the Labor Department will publish the December employment report.
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