U.S. manufacturing activity weakens over shortages, high prices

The United States saw its manufacturing activity decline in October as industries grapple with a long delivery period of raw materials. The drop was reflective of the persistent supply chain disruptions’ impact oneconomic activity.

The Institute for Supply Management (ISM) index of national factory activity slid to 60.8 in October from 61.1 in September. Manufacturing accounts for 12% of the U.S.’s gross domestic product (GDP). Despite the slowdown, the latest figure was still better than economists’ prediction of a 60.5 reading.

In October, the ISM stated that 26 commodities were in low supply, some for as long as 13 months. In September, there were only 24.

The ISM survey also showed a decline in demand due to surging prices. A measure of new orders recently dropped to a 16-month low. Nonetheless, demand remains high as retail inventories remain low, which was expected to keep manufacturing running smoothly.

Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania, said supply chain problems continue to pose risks on the gross domestic product (GDP) growth and inflation pressure.