American factory growth sped up in May after slowing in the prior two months, even as employment contracted and firms continue to face supply challenges, according to a business survey released Wednesday.
The Institute for Supply Management said its manufacturing index rose to 56.1% from 55.4% in April, beating expectations and staying above the 50% threshold indicating expansion for the 24th consecutive month.
Prices showed signs of easing, but employment entered contraction territory, falling 1.3 points to 49.6%, the report said.
"The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment," ISM manufacturing survey chair Timothy Fiore said.
"Sentiment remained strongly optimistic regarding demand."
However, he said, 10% of firms surveyed said they continue to have difficulty getting material from Asian suppliers.
"Overseas partners' disruptions are beginning to impact U.S. manufacturing, creating a near-term headwind for factory output growth," he said.
The Covid-19 lockdowns in China have been exacerbating shortages experienced in recent months of the pandemic, fueling the global inflation surge.
However, the ISM survey showed the prices index fell for the second straight month to a still-high 82.2% in a sign pressures may be easing. The index has been above 70% in 17 of the past 18 months.
But Fiore cautioned that "instability in global energy markets continues."
Comments from survey respondents reflected signs of optimism.
"Suppliers are seeing a light at the end of the tunnel for restoration of (semiconductor) component supply," one Computer & Electronic Products executive said.
Oren Klachkin of Oxford Economics flagged the positive signals in the report but said even though China is loosening lockdowns, supply issues will persist.
"Supply-chain conditions will remain highly strained and are unlikely to return to pre-Covid norms any time soon," he said.
"Growth in the manufacturing sector will moderate, but a mix of still-healthy goods spending and plenty of backlogs will keep factory output rising in the second half of 2022."
Copyright Agence France-Presse, 2022
