United States factory activity grew at its slowest pace in nearly two years in April amid a rise in workers quitting their jobs, and manufacturers are becoming more anxious about supply over the summer because of new COVID-19 lockdowns in China.
The survey from the Institute for Supply Management (ISM) on Monday described manufacturing as remaining “in a demand-driven, supply chain-constrained environment”.
ISM Manufacturing Business Survey Committee Chairman Timothy Fiore said new coronavirus outbreaks overseas were “creating a near-term headwind for the U.S. manufacturing community,” noting that some manufacturers worried “about their Asian partners’ ability to deliver reliably in the summer months.”
The ISM’s index of national factory activity fell to a reading of 55.4 last month, the lowest since July 2020, from 57.1 in March. A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy.
Economists polled by Reuters had forecast the index rising to 57.6. The second straight monthly decline in the index also reflects spending rotating back to services like travel, dining out and recreation. Government data on Friday showed consumer spending on services increasing by the most in eight months in March, while outlays on long-lasting manufactured goods dropped for a second consecutive month.
Five of the six biggest manufacturing industries, machinery, computer and electronic products, food, transportation equipment and chemical products, registered moderate-to-strong growth. Manufacturers offered a mixed assessment of supply chains.
Makers of chemical products reported that supplier shutdowns in Shanghai and long delays at ports, including in the United States “are still providing supply challenges.” In the food industry, supply chains were described as “still constrained.”
But transportation equipment manufacturers noted “improvements in the supply chain.” Manufacturers of nonmetallic mineral products said “improvements in the supply chain are occurring on larger scale items.”