Supply struggle puts brakes on U.S. manufacturing growth in April
A worker drains a gear box for a three-wheeled electric fun utility vehicle in Oregon, U.S., April 19, 2021. /CFP

A worker drains a gear box for a three-wheeled electric fun utility vehicle in Oregon, U.S., April 19, 2021. /CFP

Restrained by shortages of inputs, manufacturing activity in the U.S. grew at a slower pace in April as rising vaccinations against COVID-19 and massive fiscal stimulus unleashed pent-up demand.

The survey from the Institute for Supply Management (ISM) on Monday showed record-long lead times, wide-scale shortages of critical basic materials, rising commodity prices and difficulties in transporting products across industries.

The pandemic, now in its second year, has severely disrupted supply chains. "Companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus impacts limiting availability of parts and materials," the ISM noted.

It cautioned that worker absenteeism, short-term shutdowns due to parts shortages and difficulties in filling open positions could limit manufacturing's growth potential.

The ISM's index of national factory activity fell to a reading of 60.7 last month after surging to 64.7 in March, which was the highest level since December 1983. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9 percent of the U.S. economy.

The White House's massive $1.9-trillion pandemic relief package and the expansion of the COVID-19 vaccination program to all adult Americans have led to a boom in demand, which is pushing against supply constraints.

Inventories at factories and customers are extremely lean, which should keep production humming.

"There is little reason to think conditions are softening," said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.

Despite that, Oren Klachkin of Oxford Economics said the supply chain issues were unlikely to be enough to stop the sector's recovery, particularly as the economy's reopening progresses.

"Demand for goods will stay robust in the near term, but dissipate as the services sector fully reopens," he said.

(With inputs from Reuters and AFP)

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