U.S. manufacturing activity slowed in October, with all industries reporting record-long lead times for raw materials, indicating that stretched supply chains continued to constrain economic activity early in the fourth quarter.
The Institute for Supply Management survey on Monday also hinted at some moderation in demand amid surging prices, with a measure of new orders dropping to a 16-month low. Still, demand remains strong amid depressed retail inventories, which should keep manufacturing humming.
The ISM's index of national factory activity slipped to a reading of 60.8 last month from 61.1 in September. 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 would fall to 60.5.The economy is struggling with shortages across industries as global supply chains remain clogged.
Makers of electrical equipment, appliances and components said though demand continued to be strong, production continued "to be held back by supply chain issues." These higher costs are being passed on to consumers which, together with surging wage growth, is raising concerns that high inflation could be more persistent rather than transitory as Federal Reserve Chair Jerome Powell has repeatedly argued. The government reported on Friday that wage growth in the third quarter was the strongest on record.The ISM survey's forward-looking new orders sub-index dropped to 59.8 last month, the lowest reading since June 2020, from 66.7 in September.
Though manufacturers companies said they were still struggling to find workers, there were signs improvement.
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