Economic Report: 53.6% of Manufacturers Expect Supply Chain Challenges to Abate in 2022

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – February 1, 2020

NAM Weekly Economic Toplines:

In the latest NAM Manufacturers Outlook Survey, 86.8% of respondents felt either somewhat or very positive about their company outlook in the fourth quarter, down only slightly from 87.5% in the third quarter. While many of the key measures pulled back somewhat, expected growth rates remained solid. With a strong labor market, respondents anticipate employee wages rising at the fastest pace in the survey’s history, at 3.8% on average over the next 12 months. The top primary business challenges for the fourth quarter included rising raw material costs (87.1%), supply chain challenges (84.5%), the inability to attract and retain a quality workforce (82.7%), transportation and logistics costs (73.1%) and rising health care and insurance costs (50.7%). On the topic of workforce, 85.2% had unfilled positions within their companies for which they were struggling to find qualified applicants. Without having enough workers, nearly 45% of respondents were unable to take on new business and had lost revenue opportunities. Those completing the survey were asked when they expect supply chain disruptions to abate, and 53.6% anticipate these disruptions to improve in 2022, with 38.8% suggesting that it would be in the second half of next year. New orders for durable goods rose 2.5% to a record $268.3 billion in November, with 0.8% growth excluding transportation equipment. Nonetheless, core capital goods orders—a proxy for capital spending in the U.S. economy—edged down 0.1% for the month. The longer-term trends remained very positive, with new durable goods orders jumping 14.7% year-over-year and nondefense capital goods excluding aircraft sales just shy of an all-time high. The U.S. economy grew 2.3% at the annual rate in the third quarter. Manufacturing value-added output increased to $2.571 trillion, an all-time high, with record levels for both durable and nondurable goods. Manufacturing accounted for 11.1% of real GDP in the third quarter. Real GDP should rebound in the fourth quarter, with 6.5% growth expected. For 2021, the forecast is for 5.6% growth. For 2022, the current estimate is for 4.1% growth. Personal consumption expenditures rose 0.6% in November, boosted by stronger sales for nondurable goods and services. Durable goods spending fell 0.6% for the month. On a year-over-year basis, personal spending has jumped 13.5% since November 2020. The saving rate dropped to 6.9%, the lowest since December 2017. The PCE deflator rose 0.6% in November, with 5.7% growth year-over-year, the most since July 1982. Core inflation has increased 4.7% since November 2020, the fastest pace since February 1989. Core PCE inflation is likely to remain elevated, even if there is some stabilization over the first half of 2022. The current forecast is for the core PCE deflator to be roughly 2.5% year-over-year by the end of 2022. For its part, the Federal Reserve has accelerated the tapering of its asset purchases, with quantitative easing likely ending by March 2022. The Federal Open Market Committee is likely to increase short-term interest rates as soon as the May 3–4, 2022, meeting, with three rate hikes expected next year. Consumer confidence was somewhat higher in December in surveys from the Conference Board and the University of Michigan. Yet, inflation remains a concern in both surveys, dampening sentiment from stronger assessments earlier in the year. Existing and new home sales strengthened in November despite lingering challenges with affordability and inventory issues. Median sales prices have jumped sharply over the past year, hitting a new record for new single-family homes for the month. Note: The Monday Economic Report will not be published on Jan. 3, 2022. The next issue will be released on Monday, Jan. 10.   READ FULL ECONOMIC REPORT