US economy gaining steam as manufacturing forges ahead
US manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.
Signs that the economy was gathering momentum halfway through the fourth quarter were underscored by other data on Wednesday showing private employers maintained a strong pace of hiring last month. But there are fears that the Omicron variant of Covid-19 could hurt demand for services as well as keep the unemployed at home, and hold back job growth and the economy.
"Manufacturing should continue to contribute positively to GDP growth over the next year as businesses replenish inventories and supply-chain issues improve," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"There are risks, including the potential for businesses overbooking orders now and the Omicron variant magnifying price and supply chain issues."
The Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October.
A reading above 50 indicates expansion in manufacturing, which accounts for 12 per cent of the US economy.
Economists polled by Reuters had forecast the index rising to 61.0.
"The US manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement," said Timothy Fiore, ISM chair of the manufacturing business survey committee.
Global economies' simultaneous recovery from the Covid-19 pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.
The Federal Reserve's Beige Book on Wednesday described economic activity as growing at "a modest to moderate pace" during October and early November, but noted that "growth was constrained by supply chain disruptions and labor shortages."
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