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US manufacturing sector continues recovery in 2021

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US manufacturers are feeling optimistic as Covid-19 vaccines are rolled out

American factories continued to recover from the Covid-19 downturn in the first month of the year, albeit at a slightly slower pace, an industry survey said on Monday.

The Institute for Supply Management's (ISM) manufacturing index was at 58.7 percent in January, less than analysts had forecast but nonetheless above the 50-percent reading indicating expansion for the eighth straight month after the sector plunged as the pandemic began.

The softening has contributed to a decline in both new orders and production, but employment continued to recover even as factories complained the virus complicated operations.

"Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential," the survey's chairman Timothy Fiore said.

New orders dropped 6.4 points to 61.1 percent, while production lost four points to hit 60.7 percent. Prices saw a big jump to 82.1 percent, their highest level since April 2011 as manufacturers paid more for the raw materials they required.

Employment, which was hard-hit as the pandemic caused businesses to shut down or modify operations, climbed modestly to 52.6 percent.

Of 18 manufacturing sectors surveyed, only two, the printing and coal and petroleum industries, reported contraction last month.

Manufacturers are optimistic about the future as Covid-19 vaccines are rolled out across the United States, with ISM reporting three positive comments for each cautious comment received.

"Manufacturing sector prospects for 2021 are upbeat, with solid consumer goods demand, inventory restocking, gradual business reopenings and additional federal pandemic relief all set to keep activity on a firm footing," Oren Klachkin of Oxford Economics said in an analysis.

"We expect manufacturing momentum to start cooling around mid-year as vaccine distribution unlocks badly-damaged services activities while concurrently quelling consumer goods demand."

cs/ft