U.S. Manufacturing Slumps to Weakest Since 2020 as Shortages Hit Production and Delays Depress Orders

A gauge of American manufacturing slid in December to its weakest reading in a year.

The final reading of the U.S. manufacturing purchasing managers index from IHS Markit was revised downward to 57.7 from the earlier “flash” reading of 57.8.  Economists had not expected the tick down. In November, the PMI index was at 58.3.

This was the lowest reading for the index since the prior December and highlights that shortages of materials and supplier delays are a mounting drag on the economy, defying predictions from last year that these would lift as the economy moved past the pandemic and vaccinations spread.

“December saw another subdued increase in US manufacturing output as material shortages and supplier delays dragged on. Although some reprieve was seen as supply chains deteriorated to the smallest extent since May, the impact of substantially longer lead times for inputs thwarted firms’ ability to produce finished goods yet again,” said Sian Jones, senior economist at IHS Markit.

Delivery time delays depressed new orders, Jones said.

“Adding to the sector’s challenges was an ebb in client demand from the highs seen earlier in 2021, with new orders rising at the slowest pace for a year, largely linked to a reluctance at customers to place orders before inventories were worked through. Alongside a slight pick-up in hiring, softer demand conditions contributed to the slowest rise in backlogs of work for ten months,” Jones said.

New orders rose at the slowest pace for a year. This was linked to a reluctance at customers to place orders before inventories were worked through.

Inflationary pressures eased a bit, with costs of materials rising at the slowest pace in six months and increases in selling prices softened.

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