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US manufacturers power through December Covid surge

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US manufacturers face risks in the months ahead, even as vaccines against Covid-19 are finally being rolled out./AFP
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Jan 06, 2021 - 07:53 AM

WASHINGTON — The resurgence of Covid-19 in the United States did not hold back factories in December, which saw activity grow faster than expected, according to an industry survey released Tuesday.

The Institute for Supply Management’s (ISM) manufacturing index rose to 60.7 percent last month, defying forecasts that it would decline slightly as the world’s largest economy struggled with surging levels of coronavirus infections.

“Manufacturing performed well for the seventh straight month, with demand, consumption and inputs registering strong growth compared to November,” survey chair Timothy R. Fiore said.

Manufacturing activity plummeted when the Covid-19 pandemic began in March, but has regained ground since. December’s result was 3.2 points higher than November and the seventh consecutive month above the 50-percent threshold indicating growth.

New orders rose 2.8 points to 67.9 percent last month, while production jumped four points to 64.8 percent.

The employment index also rose to 51.5 percent, returning to expansionary territory.

But Ian Shepherdson of Pantheon Macroeconomics warned that was “nothing like enough to signal a full recovery in manufacturing jobs anytime soon.”

Sixteen of 18 industries surveyed reported growth last month, including the six largest, Fiore said, with the survey receiving three positive comments from companies for every cautious one.

“Business is stronger than expected, with higher demand for many products. Volatility continues due to the very persistent pandemic and associated risks,” a company in the electrical equipment, appliances and components industry told the survey.

Oren Klachkin of Oxford Economics warned the index could struggle in coming months, amid increasing cases and the smaller-than-expected stimulus package approved by Congress last month.

Klachkin pointed to a nearly six-point rise in the supplier deliveries index — which is inversely correlated and means factories are seeing slowdowns in the supplies they need.

“Factories will face headwinds from the virus’ recent resurgence, slower economic recovery and ongoing supply chain disruptions and shortages,” Klachkin said.

“While we can be confident that vaccines will bring the pandemic to an eventual end, broad recovery risks will remain tilted to downside risks in the near term.”

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