US manufacturing expansion continues in February

[WASHINGTON] American manufacturing firms continued to see growth accelerate as demand rose in February, but the expansion was again constrained by supply chain issues and labour shortages, according to an industry survey released Tuesday.

The Institute for Supply Management (ISM) said its manufacturing index rose a full point to 58.6 last month, pushed by a 3.8-point jump in new orders and a solid gain in production. Any reading above 50 per cent indicates growth.

But the Covid-19 pandemic continued to be felt and the survey showed the backlog of orders posted its biggest increase since 2011 while inventories fell.

"The US manufacturing sector remains in a demand-driven, supply chain-constrained environment," ISM survey chair Timothy Fiore said.

"The impact of omicron declined in February as swiftly as it appeared in December, leaving March and April's manufacturing environment favourable," he said in a statement.

Hiring remains one of the "headwinds" facing industries, and while firms report better luck filling open positions, they also face more openings as workers leave or retire, he said.

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The employment index dropped sharply and Fiore said, "Challenges with turnover (quits and retirements) and resulting backfilling continue to plague panelists' efforts to adequately staff their organisations."

Executives from the machinery and electrical equipment industries said the shortage of materials and parts like semiconductors mean they cannot ramp up output to meet strong demand.

Oren Klachkin of Oxford economics warned that Russia's invasion of neighbouring Ukraine could hit global supply chains again.

"A full pipeline will propel strong manufacturing activity," he said in an analysis. "However, supply chain and hiring difficulties will drag on the sector's expansion, and the war in Ukraine means the peak in supply-side stress may not be behind us." The conflict and rising energy prices also pose a risk to US growth and the Federal Reserve's efforts to contain rising prices, with inflation at the highest in four decades. AFP