Daily Management Review

Manufacturing Boom In April In US Signals Continued Booming Economy


Manufacturing Boom In April In US Signals Continued Booming Economy
With the American economy reopening and a surge in domestic demand, manufacturers in the United States are increasingly finding it difficult to source raw materials and other inputs even though factory activity in the country continued to surge in April.
Good news for the US economy continued to flow with another report showing sale of new homes in March reaching a fourteen and half-year high. The White House's massive $1.9 trillion Covid-19 pandemic rescue package as well as the fast pace of Covid-19 vaccinations has boosted the US economy.
There was growth in employment as retail sales reached a record high in March which reinforced expectations of a robust turnaround of the economy in the first quarter and putting the economy in line for a possible best performance in almost four decades.
The IHS Markit flash US manufacturing PMI jumped to 60.6 in the first half of this month, according to data firm IHS Markit. That was preceded by 59.1 in March and was the highest reading of the PMI since the series started in May 2007. In a Reuters poll, economists has forecast the index surging to 60.5 in early April. A reading above 50 indicates growth in manufacturing, which makes up 11.9 per cent of the US economy.
"The U.S. economy is enjoying a strong start to the second quarter, firing on all cylinders as loosening virus restrictions, an impressive vaccine roll-out, a brighter outlook and stimulus measures all helped boost demand," said Chris Williamson, chief business economist at IHS Markit.
According to the U.S. Centers for Disease Control and Prevention (CDC), ay leasy one shot of Covid-19 vaccine have been administered to more than half of American adults while complete vaccination has been administered to one third of the total adults of the country. This has allowed broader economic re-engagement in conjunction with the fiscal stimulus by the government.
But strong demand is impacting the supply constraints. Labour force at factories and their suppliers have been disrupted by the Covid-19 pandemic which has resulted in shortages ion supply and causing rise in prices of raw materials and other inputs.
The measure of the prices paid by manufacturers, according to IHS Markit survey, surged to its highest level since July of 2008. The surge in input prices was blamed on   “severe supplier shortages and marked rises in transportation fees.”
Economists expect the inflation to rise this year over the Federal Reserve's 2 per cent inflation target partly because of the continued rise in input costs. Confidence on the ability of the supply chains to adapt and become more efficient was expressed recently by Fed Chair Jerome Powell which he also expects will help to prevent continued high prices of raw materials and other manufacturing input for a sustained period of time.
There have been backlogs of uncompleted work "of a magnitude not surpassed for over seven years" because of supply shortages, according to IHS Market. The auto industry has been hit most by the raw material squeeze as it faces a global shortage of automotive semiconductors which has forced many auto companies to pause or curb production.