Summary The Omicron wave weighed on manufacturing activity in January amid a pullback in demand and increased absenteeism in the workplace. Despite these headwinds, the ISM manufacturing report continued to signal incremental thawing of supply problems. Manufacturers seem to have somewhat of an easier time securing inputs, but finding the help they need remains a severe challenge. Omicron Thwarts Current Production, but Plenty of Past Orders in the Hopper The ISM manufacturing index slid 1.2 points to 57.6 in January (chart). While current activity was weaker amid a 1.2 point drop in the production component, the 3.1 point decline in new orders suggests some pullback in demand as well. The declines in January brought both of these components to their lowest levels in over a year and a half, signaling weaker activity in the sector (chart). That said, the decline in production activity likely would have been even larger if it weren’t for the 6.4 point drop in the backlog of orders, which suggests manufacturers were still able to chip away at backlog last month despite Omicron-related headwinds. This was the largest drop in the backlog component since the lockdowns in April-2020 and supports the notion that supply chain problems are somewhat easing (chart). READ FULL ARTICLE>>
