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Economy

US Manufacturing Activity Grows for the 12th Straight Month

SILVER SPRING, Md. — Growth in U.S. manufacturing picked up in May, even as supply chain problems persist and businesses continue to struggle to find workers.

The Institute for Supply Management, a trade group of purchasing managers, said Tuesday that its index of manufacturing activity rose in May to a reading of 61.2 in May from 60.7 in April.

Any reading above 50 indicates manufacturing is expanding. May was the 12th consecutive month manufacturing has grown after contracting in April 2020, when coronavirus fears triggered business shutdowns across the country.

With million of Americans vaccinated and most of the U.S. back to business as usual, the manufacturing sector is struggling to keep up with demand, which is generally considered not a bad problem to have. Shortages of raw materials including lumber, metals and plastics, are choking the supply chain, making it difficult for manufacturers to make and deliver products on time. 

Companies are also having trouble filling positions, causing further delays in production and delivery.

"Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential," said Timothy Fiore, chair of the ISM manufacturing survey committee.

An overwhelming majority of businesses surveyed for the report said they are hiring or attempting to hire workers, with more than half of them saying they've experienced difficulties in doing so, as the broader employment situation has rapidly improved in the U.S. Layoffs have declined for four straight weeks and with demand at high levels across virtually all industries, those looking for work have more options than they have had in a long time.

New orders grew at a faster rate last month while the production measurement declined, leading to an increase in backlogged orders. 

The government reported last week that the economy, as measured by the gross domestic product, grew by a solid 6.4% between January and March and many analysts expect growth could top 10% in the current quarter as the economy re-opens further.

If growth across the broader economy continues along with materials and workers shortages, many expect manufacturers will continue to struggle to keep up with the pent-up pandemic demand.

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