Factory growth up in September despite supply woes

By Martin Crutsinger
AP Economics Writer

WASHINGTON (AP) — U.S. manufacturing growth accelerated last month to the highest level since May despite global supply chain disruptions.

The Institute for Supply Management, a trade group of purchasing managers, said last Friday that its index of manufacturing activity rose to a reading of 61.1 percent in September, 1.2 percentage points above the August level of 59.9 percent.

It was the best showing for manufacturing since a reading of 61.2 in May. Any reading above 50 indicates growth in the sector. September was the 16th consecutive month in which manufacturing has grown since April 2020 when the coronavirus triggered a nationwide shutdown and manufacturing slowed drastically.

Despite the overall increase, manufacturing is still struggling with supply chain problems, partially due to labor shortages as more older factory workers choose retire rather than go back to work.

Refineries and petrochemical plants along the Gulf Coast, the heart of the U.S. industrial energy complex, are still recovering from the arrival of Hurricane Ida in late August.

Timothy Fiore, chair of the ISM manufacturing survey committee, said U.S. companies "continue to deal with an unprecedented number of hurdles to meet increasing demand" as the economy reopens.

One survey respondent in the food industry said, "Lack of labor and escalating costs from every direction are very concerning."

Other respondents cited the backups at the nation's ports and problems in getting needed products and parts from Asia because of the COVID-19 outbreaks in the region. One of the most far-reaching shortages has been in the computer chips that are now a critical component in automobiles and other manufactured goods.

Oren Klachkin, lead U.S. economist for Oxford Economics, expects supply chain disruptions will be a drag on economic growth well into next year, but also noted some positive developments at play.

"A monumental backlog of orders, driven by robust demand and inventory restocking and stronger overseas demand, will keep manufacturing humming into 2022," he said.

The September report showed that 17 of 18 manufacturing industries reported growth in September led by gains in furniture and related products. The one industry that did not see growth in September was wood products.