3 Minutes to Read (Reuters) – WASHINGTON, July 1 (Reuters) – Manufacturing activity in the United States increased at a moderate rate in June, but employment fell for the first time in seven months, owing to severe shortages of raw materials and manpower. The Institute for Supply Management (ISM) reported on Thursday that its national manufacturing activity indicator fell to 60.6 last month from 61.2 in May, the lowest value since January. A rating of more than 50 suggests that manufacturing, which accounts for 11.9 percent of the US GDP, is expanding. The index was expected to fall to 61.0 in June, according to economists polled by Reuters. During the COVID-19 pandemic, massive fiscal stimulus stimulated demand for long-lasting manufactured goods, with millions of Americans working from home and learning remotely. As the epidemic shattered supply networks and disrupted the global shipping industry, factories are trying to keep up. The production of automobiles, electronics, and household appliances is being hampered by a global shortage of semiconductors. Raw material shortage is driving up costs for both producers and consumers, leading to the current increase in inflation. Despite the fact that rising inflation is often regarded as temporary, Americans should expect to pay more for products and services until the demand-supply gap narrows. Goldman Sachs economists predict that supply will begin to catch up later this year, but that it will take until at least mid-2022 to fully recover vehicle inventories. The gauge of prices paid by manufacturers in the ISM survey surged to a new high of 92.1 last month, up from 88.0 in May. In May, the Federal Reserve’s main annual inflation measure rose by the most in 29 years. The reopening of the economy is also fueling demand, with more than 150 million Americans completely vaccinated. The forward-looking new orders sub-index of the survey fell to 66.0 last month, down from 67.0 in May. Factory inventories are still low, and commercial warehouses are nearly empty. Due to an increase in productivity, industries were able to clear part of the backlog of unfinished work. For the first time since November, a measure of factory employment fell. Even though 9.3 million individuals are officially unemployed, labor is scarce. Government-funded unemployment benefits, child care issues, and fears of acquiring the virus have all been cited for keeping workers at home. There have also been retirements and transitions to new jobs as a result of the pandemic. The June ADP National Employment Report, released on Wednesday, revealed a decrease in factory hiring last month. According to a Reuters poll of economists, the government’s carefully awaited employment data on Friday will likely show that nonfarm payrolls climbed by 700,000 jobs in June after expanding by 559,000 in May. (Lucia Mutikani contributed reporting, and Chizu Nomiyama edited the piece.)/n
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