This post was originally published on this site
The numbers: The ISM barometer of American factories rose slightly to 58.6% in February in a sign the economy partly rebounded after an omicron-induced lull toward the end of last year.
The increase in the manufacturing index was the first in four months.
Economists polled by The Wall Street Journal forecast the index to rise to 58% from a 14-month low of 57.6% in January. Any number above 50% signifies growth.
The report, compiled by the Institute for Supply Management, is seen as a mirror of the health of the U.S. economy.
Big picture: The receding wave of omicron cases and end of government restrictions is giving the economy a boost, but widespread shortages and high inflation are still restraining growth.
Now the war in Ukraine threatens to exacerbate inflation in the short run owing to higher prices of oil and other key commodities. The conflict could also add further disruptions to global trade.
Key details: The index of new orders rose 3.8 points to 61.7% last month after falling at the start of 2022 to the lowest level in a year and a half. Production also edged up.
Yet a gauge of employment dipped to 52.9% to mark a five-month low. Businesses struggled with more early retirements and a greater number of workers quitting than usual.
The backlog of orders also soared to the second highest level on record, a sign that companies can’t produce enough to meet high demand. A lack of labor and ongoing shortages of key supplies are holding back production and contributing to the highest U.S. inflation in 40 years.
“We are expecting a year of strong demand, higher prices and continued supply chain challenges,” said an executive at a textile mill.
Timothy Fiore, chairman of the survey, said businesses can cope with labor and supply shortages so long as they have plenty of customers pestering them with orders.
“As long as demand is strong, everything else we can deal with,” he said.
Fiore also said he doubted the war in Ukraine would affect U.S. manufacturers, at least not anytime soon.
Looking ahead: “Most firms report difficulty hiring and cite labor availability as a key hindrance alongside supply chain problems,” said chief economist Joshua Shapiro of MFR Inc.
“A glimmer of hope, however, is that there are increasing reports that some of the shortages and supply chain issues are beginning to abate.”
Market reaction: The Dow Jones Industrial Average
SPX,
DJIA,
and S&P 500
SPX,
declined in Tuesday trades. Stocks have fallen this year and have been under pressure for the past week because of the Russian invasion of Ukraine.
