Activity in the US manufacturing sector expanded in January but at a slower rate than December, according to the Institute for Supply Management’s “Manufacturing ISM Report on Business,” released today. Meeting demand remains a challenge due to hiring difficulties and labor turnover at all tiers.

“The US manufacturing sector remains in a demand-driven, supply chain-constrained environment, but January was the third straight month with indications of improvements in labor resources and supplier delivery performance,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee. “Still, there were shortages of critical intermediate materials, difficulties in transporting products and lack of direct labor on factory floors due to the Covid-19 omicron variant.”

Overall, the ISM’s Manufacturing PMI measure of activity in the US manufacturing sector fell to a reading of 57.6% in January from 58.8% in December, indicating expansion at a slower rate. A reading above 50% indicates the manufacturing economy is generally expanding. A Manufacturing PMI above 43.1% over time generally indicates an expansion of the overall economy.

January’s index was the lowest reading since November 2020, supporting views that economic growth lost steam at the start of the year, Reuters reported. Its poll of economists had forecast the index dropping to 57.5.

The employment subindex of the Manufacturing PMI edged upward to a level of 54.5% in January from 53.9% in December, indicating an expansion in employment.

Data for the ISM’s Manufacturing PMI come from purchasing and supply executives across the US. Comment from respondents include:

• “While there has been some improvement in materials making it to our factories and logistics centers, we are still constrained by (a lack of) qualified labor. Orders so far are not being cancelled, but we are concerned that customers may be losing patience.” [Computer & Electronic Products]
• “Lack of skilled production personnel, either from missing work due to (Covid-19) variants or leaving for better opportunities, making it more difficult to complete work. Working off a backlog.” [Fabricated Metal Products]
• “Bookings continue to increase as we are still dealing with a shortage of labor and supply chain issues.” [Furniture & Related Products]
• “Transportation restrictions and a lack of supplier manpower continue to create significant shortages that limit our production. This, in turn, limits what we can supply to customers, as well as on-time delivery.” [Machinery]