The numbers: A closely followed index of U.S.-based manufacturers rose to 61.1% in November from 60.8% in the prior month, the Institute for Supply Management said Wednesday. That matched the forecast of economists polled by The Wall Street Journal.
Any number above 50% signifies growth. This is the 18th straight month in which the index has been above that level.
Big picture: Manufacturers — indeed most companies — are in a odd spot.
They have plenty of demand from customers for new cars, appliances, computers and the like. Yet businesses can’t make enough products owing to a major shortages of labor and supplies.
These bottlenecks have forced companies to pay more and contributed to the biggest surge in U.S. inflation in 31 years.
A full economic recovery and and lower inflation is unlikely until these shortages ease, but they are likely to persist well into next year. The Federal Reserve has become so worried it’s stopped calling the burst of inflation “transitory.”
Key details: New orders and production rose in November. Both indexes topped the 60% mark.
Employment also increased again, with the gauge rising to 53.3% from 52%.
There was some evidence of a slight easing in supply bottlenecks as companies managed to reduce their backlog of orders and speed up deliveries.
“Business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor,” said an executive at a maker of furniture.
The ISM index is compiled from a survey of executives who order raw materials and other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy.
What are economists saying? “The supply-chain measures in the survey all eased in November, though they remain elevated. All these numbers peaked in the spring, suggesting that the worst of the supply-chain crisis is over, though it will be a while before normal conditions are fully restored,” said Ian Shepherdson, chief economist at Pantheon Economics.
Market reaction: The Dow Jones Industrial Average DJIA, +1.14% and S&P 500 SPX, +1.58% rose in Wednesday trades. Stocks have retreated recently from record highs on worries about the omicron strain of the coronavirus and surging inflation.