–ISM: Conflict in Ukraine Unlikely To Hurt US Manufacturing Expansion
–ISM Concerned Rising Energy Prices To Provide Headwinds To US Economy
–ISM Survey Shows Supply Chain Constraints Remain, Backlogs Grow
By Max Sato
(MaceNews) – US manufacturing activity rebounded in February after Covid restrictions caused by the Omicron variant slowed the sector’s growth in January, but supply bottlenecks continued, data from the Institute for Supply Management (ISM) released Tuesday showed.
The US manufacturing sector index compiled by the ISM posted the first increase in four months, rising to 58.6 in February from a 14-month low of 57.6 in January, backed by new orders and the fastest growth in backlog orders in 11 years.
The main index stayed above the breakeven point of 50, indicating that the overall economy expanded for the 21st consecutive month.
Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, told reporters that he expects business conditions to improve further in coming months as the drag from Omicron has waned and the situation in Ukraine is unlikely to hurt expansion in US manufacturing activity, although he warned that rising energy prices are a headwind.
“I think we are still on the path to a proper supply and demand equilibrium,” he said. “As long as demand is strong, everything else we can deal with.”
Ukraine and Russia are integrated into the global economy, which means the conflict is likely to affect supply of food, energy and aluminum, Fiore said, but added, “I don’t see it is dragging down the manufacturing expansion in the United States.”
Asked about the risk of a possible retaliation by Moscow to Western allies for their economic sanctions imposed after Russia invaded Ukraine last week, Fiore had no specific comments but said, “I’m really concerned about the energy markets. We have oil over $100 a barrel. That definitely provides headwinds for the US economy.”
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” he said in a statement. “The Covid-19 Omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March.”
“Electronic supply chain is still a mess,” a firm in the computer and electronic products category told the ISM survey. A transportation equipment maker said demand remains strong, but added “Supply of transportation services continues to be a major issue for the supply chain.”
A machinery maker noted that its year-over-year revenue growth is about 10% due to markets coming back, but that “in the automotive area, the microchip shortage is causing slowness in growth.”
On the upside, the new orders index rose to 61.7 in February from 57.9 in January, which was the lowest point since June 2020, when it picked up to 56.8 from 32.3 the previous month in the aftermath of the first wave of the pandemic.
The production Index marked the first rise in four months, rising to 58.5 from 57.8, which was the lowest level since June 2020, when it rose to 56.1 from 34.0 it the prior month.
The backlog orders index grew at the fastest pace in 11 years, up 8.6 points at 65.0 in February (the largest increase since 10.8 percentage points in January 2011) after slumping to 56.4 in January, which was the lowest since 55.7 in October 2020 and compared with a record high of 70.6 hit in May 2021.
The inventories index edged up to 53.6 in February after slipping to a six-month low of 53.2 the previous month.
On the downside, the index showing supplier delays rose to 66.1 in February after falling for the third straight month to a 14-month low of 64.6 in January. Lower numbers indicate an improvement.
The index showing prices paid fell to 75.6 from a record high of 76.1 in January while the employment index stood at 52.9, down from 54.5. A higher-than-normal quits rate and early retirements continued.