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Economic Report: U.S. manufacturers growing fast but still struggling with shortages, ISM finds

The numbers: American manufacturers are pumping out goods as fast as they can to meet strong customer demand, a new survey showed, but ongoing labor and supply shortages have snarled production and are feeding the biggest surge in U.S. inflation in decades.

A closely followed index of U.S.-based manufacturers rose to 61.1% in November from 60.8% in the prior month, the Institute for Supply Management said Wednesday. That matched the forecast of economists polled by The Wall Street Journal.

Any number above 50% signifies growth.

Read:Consumer confidence sinks to 9-month low on inflation and Covid worries

Big picture: Manufacturers — indeed most companies — are in a odd spot.

They have plenty of demand from customers for new cars, appliances, computers and the like. Yet businesses can’t make enough products owing to a major shortages of labor and supplies.

These bottlenecks have forced companies to pay more and contributed to the biggest surge in U.S. inflation in 31 years.

A full economic recovery and and lower inflation is unlikely until these shortages ease, but they are likely to persist well into next year. The Federal Reserve has become so worried it’s stopped calling the burst of inflation “transitory.”

Key details: New orders and production rose in November. Both indexes topped the 60% mark.

Employment also increased again, with the gauge rising to 53.3% from 52%.

There was some evidence of a slight easing in supply bottlenecks as companies managed to reduce their backlog of orders and speed up deliveries. But executives say they have a long way to go.

“Business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor,” said an executive at a maker of furniture.

The ISM index is compiled from a survey of executives who order raw materials and other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy.

Market reaction: The Dow Jones Industrial Average
DJIA,
+1.18%

and S&P 500
SPX,
+1.51%

rose in Wednesday trades. Stocks have retreated recently from record highs on worries about the omicron strain of the coronavirus and surging inflation.

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