WASHINGTON D.C.: In February, U.S. manufacturing activity picked up more than predicted, as the number of COVID-19 infections declined throughout the U.S., though hiring at factories slowed, keeping supply chains disrupted and prices for inputs high. Factories also reported strong order growth, while the Institute for Supply Management (ISM) said the outlook for manufacturing over the next two months was favorable, noting that backlog orders last month grew by the most in 11 years. However, the survey was conducted before the start of Russia’s invasion of Ukraine, which could further disrupt supply chains and especially worsen the shortage of semiconductors, as Russia and Ukraine are producers of key materials used to manufacture semiconductors, analysts said. “Falling coronavirus cases should help the domestic side of the economy improve further in the spring months, but spillover from higher energy and food prices and international shipping disruptions related to the Russia-Ukraine war are a downside risk to manufacturing near-term,” said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio, as reported by Reuters. The ISM’s index of national factory activity increased to a reading of 58.6 last month, from 57.6 in January, which was the lowest since November 2020. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9 percent of the U.S. economy. Economists polled by Reuters had forecast the index would rise to 58.0. Transportation equipment, machinery, computer and electronic, food, chemical, as well as petroleum and coal products reported moderate-to-strong growth. In line with the broader economy, manufacturing is regaining momentum, after being affected by a rise in coronavirus infections driven by the Omicron variant. Additionally, customer inventories have remained extremely lean for more than 60 months. As the Russia-Ukraine crisis deepened, stocks on Wall Street tumbled, and the dollar rose against a basket of currencies, while U.S. Treasury yields fell. Makers of computer and electronic products complained that the “electronic supply chain is still a mess,” while electrical equipment, appliances and components manufacturers reported that they “are not able to increase builds to cut into the backlog.” With Russia facing severe export disruptions to all commodities, from oil and metals to grains, after western nations imposed stiff sanctions, inflation could accelerate in the months ahead. “We expect the heat to remain turned up on prices for some time still amid the continued supply imbalance and higher energy and commodity costs, as a result of Russia’s invasion of Ukraine,” said Tim Quinlan, senior economist at Wells Fargo in Charlotte, North Carolina, according to Reuters.
US manufacturing activity regains pace following Covid disruptions
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