U.S. manufacturing gauge slips

Drops in supply deliveries, materials prices bode well

A measure of U.S. manufacturing fell short of expectations at the end of 2021, reflecting declines in gauges of delivery times and prices that belie an otherwise solid demand picture.

The Institute for Supply Management’s gauge of December factory activity fell to 58.7, the lowest level since January 2021, from 61.1 in the month before, according to data released Tuesday. Readings above 50 indicate expansion and the median forecast in a Bloomberg survey of economists called for 60.

The pullback in the headline figure obscures strength in the underlying components. The group’s gauges of supplier deliveries and prices paid for materials — while still elevated — both fell to their lowest levels in more than a year.

Improved delivery times and lower input prices typically indicate softer demand. However, the latest declines suggest capacity constraints are beginning to loosen. That’s welcome progress for manufacturers who have struggled to keep up with demand because of materials shortages, hiring challenges and transportation bottlenecks.

The institute’s demand indicators remained firm in December, suggesting the manufacturing sector will continue to expand at a healthy pace. The employment gauge rose to an eightmonth high, and the new orders index eased just slightly to a healthy 60.4.

Fifteen manufacturing industries reported growth in December, led by apparel, furniture and textiles.

The institute’s factory production measure slipped to 59.2, the lowest since July but robust by historical standards.

The pullback may reflect disruptions caused by the omicron variant.

The institute’s demand indicators remained firm in December, suggesting the manufacturing sector will continue to expand at a healthy pace.