The expansion of the plant in the United States is solid; Highest price gauge since 1979
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The U.S. manufacturing sector continued to grow at a sustained, but slightly slower pace in June, as a measure of the prices paid for materials hit a nearly 42-year high.
An indicator of factory activity rose to 60.6 from 61.2 in May, according to data from the Institute for Supply Management released on July 1.
While a measure of new orders declined, production resumed and allowed manufacturers to make modest progress on well-raised order books. At the same time, the factory employment indicator has narrowed, adding to evidence that producers continue to struggle to find skilled workers in times of high demand.
“High delay levels, too low customer inventories and record delivery times for raw materials are being reported,” Timothy Fiore, chairman of the ISM Manufacturing Firms Investigation Committee, said in a statement. . “The challenges of working across the entire value chain continue to be the main obstacles to increasing growth. “
The ISM index of prices paid for raw materials rose to 92.1, a level not seen since the Iranian revolution of 1979 and the oil crisis. Logistics challenges, high raw material prices and shortages of various supplies continue to put manufacturers under pressure.
Semiconductor shortages were particularly disruptive for the auto industry, where production at the start of the year was limited due to lack of supply.
Despite last month’s declines in ISM measurements of order books and total reservations, the numbers remained high. While a gauge of supplier delivery times has eased, they have remained elongated. Manufacturers reported that the average lead time for materials used in the production process had lengthened to a record 88 days in June.
Even though labor and supply constraints continue to limit production efforts, “demand is expected to remain fairly strong until the end of the year, probably until the first quarter of 2022,” said Fiore said during a call with reporters. This suggests that “commodity prices are unlikely to start easing until somewhere near the end of the year,” he said.
Meanwhile, a gauge of export orders has strengthened, indicating that overseas economies are making further progress in coming out of a downturn in activity linked to the pandemic.
The ISM employment index slipped 1 point in June to 49.9, just below the level that signals stagnation even as orders and production remain strong.
The government’s July 2 monthly employment report is expected to show manufacturing workers up 25,000 in June, the most in three months. Overall employment is expected to increase by over 700,000.
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