US Manufacturing Ended 2021 With The Weakest Performance In A Year

U.S. manufacturing activity did not end on the most positive of notes in 2021. In fact, it hit its lowest level in about a year.

The Institute for Supply Management (ISM) on Tuesday released its latest manufacturing activity index, which showed that overall activity fell to a reading of 58.7, down from 61.1 in November. Any reading over 50 usually indicates an expansion in manufacturing, but December's reading was the lowest recorded since January 2021 when it was 51.1.

Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said the manufacturing sector is suffering from a supply chain-constrained environment.

However, he indicated that there are signs of improvement in the labor resources available to firms and supply deliveries.

However, Fiore explained that the continued labor shortage that has bedeviled many sectors of the U.S economy has served as an "offset" that has undercut month-by-month growth in manufacturing performance.

"For the second month in a row ... panelists' comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover," Fiore said in a statement.

Supply chain bottlenecks and labor shortages pushed inflation to levels not seen in decades throughout 2021. Core inflation indices like the Commerce Department’s Consumer Price Index (CPI) rose by 6.8% in November.

Concern about the Omicron variant is another factor that has unnerved firms and governments. Since emerging in late November last year, the strain has spread across the world and it carries the risk of more shutdowns overseas that can worsen supply chain bottlenecks.