US Manufacturing Accelerates; The tight supply is pushing home sales to a 10-month low



An employee works at the Kirsh Foundry in Beaver Dam, Wisconsin, United States on April 12, 2018. REUTERS / Timothy Aeppel / File Photo

US factory activity picked up in early May on strong domestic demand, but incomplete work backlogs pile up as manufacturers struggle to find raw materials and workers, adding to costs for businesses and consumers.

Although other data on Friday showed home sales fell to 10-month lows in April as an acute shortage of homes pushed prices to record highs, they remained well above pre-pandemic levels. The real estate market and manufacturing sectors have bounced back from the COVID-19 recession that began in February 2020.

“The economic recovery continues,” said Daniel Silver, an economist at JPMorgan in New York.

Data company IHS Markit announced that the PMI for US flash manufacturing rose to 61.5 in the first half of this month. This was the highest since October 2009, followed by a final value of 60.5 in April. Economists polled by Reuters had forecast that the index would drop to 60.2 in early May.

A value above 50 indicates growth in manufacturing, which accounts for 11.9% of the US economy.

Demand shifted to goods from services as the pandemic kept Americans at home and caused supply shortages. The virus also disrupted the work of manufacturers and their suppliers and led to a cross-sectoral shortage of raw materials. Continue reading

More than a third of the population has been vaccinated, so the economy as a whole can open up again. While that, along with nearly $ 6 trillion in pandemic aid provided by the government last year, is triggering pent-up demand for services, the appetite for goods remains healthy.

According to IHS Markit, “Manufacturers have highlighted that capacity loading and raw material shortages are expected to continue through 2021.” The supply crisis was found to increase production costs for manufacturers who “made efforts to pass higher cost burdens on to customers”.

The price measurement paid by manufacturers in the IHS Markit survey reached its highest level since July 2008.

Federal Reserve officials generally view supply chain bottlenecks as temporary and expect them to temporarily drive inflation above the US Federal Reserve’s 2% target. It is also recognized that the bottlenecks may take longer to resolve.

Minutes of the April 27-28 meeting of the Fed, published Wednesday, showed that “a number of attendees noted that supply chain and input bottlenecks may not be resolved quickly” and that this “raises prices above this These officials also found that in some industries, supply chain disruptions appeared to be more persistent than originally thought.

Backlog began to accumulate at the fastest pace in 14 years, according to IHS Market. The number of incoming orders increased. Although the factories tried to recruit more workers, the rate of hiring was the slowest in five months.

US stocks traded higher. The dollar gained against a basket of currencies. US Treasury bond prices were mixed.


In a separate report on Friday, the National Association of Realtors said inventory home sales fell 2.7% last month to a seasonally adjusted annual rate of 5.85 million units, the lowest since June. The third consecutive monthly decline in revenue was due to the decline in transactions in the northeast, west and the densely populated south. Sales rose in the Midwest.

Economists had forecast an increase in sales of 2.0%. Home resales, which account for the bulk of US home sales, rose 20% in the first four months of this year compared to the same period last year. The real estate market is fueled by the demand for larger, more expensive accommodations after the pandemic forced millions of Americans to work from home and take distance education. However, the virus has disrupted the labor supply in sawmills and ports, leading to a shortage of sawn timber and other raw materials.

This limits the ability of home builders to push new home construction, perpetuate a shortage of inventory that drives prices up, and threatens to foreclose first-time buyers from the market. The government reported this week that housing construction fell in April. Continue reading

There is hope that the reopening economy could encourage more homeowners to bring homes to market. Some older Americans have likely delayed mining due to the pandemic.

The median price for existing homes rose 19.1% year over year to an all-time high of $ 341,600 in April.

Economists don’t believe another housing bubble is developing, and note that the spike is mainly due to a supply-demand mismatch, rather than poor lending practices that sparked the 2008 global financial crisis.

“The people who buy houses have the income and down payments as they often trade one house for another,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “And economic growth should remain strong this year, and while it may slow down next year, it is not expected to stall significantly.”

In April, 1.16 million homes were on the market, a decrease of 20.5% compared to the previous year. At the sales pace in April, it would take 2.4 months to run out of current stocks, compared to 4.0 months a year ago. A supply of six to seven months is considered a healthy balance between supply and demand.

Homes typically stayed in the market for 17 days in April, compared with 27 days a year ago. Eighty-eight percent of homes sold last month had been on the market for less than a month. First-time buyers accounted for 31% of sales in April, after 36% in the previous year.

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