Factory production impacted by port congestion
December ISM survey shows slower growth caused in part by supply disruptions at ports.
Factory production grew at a slower pace in December and experts pointed to congestion at West Coast ports as a contributing factor. The Institute for Supply Management last Friday said its purchasing managers index decreased 3.2 percentage points from November’s reading to 55.5 percent.
A reading above 50 percent indicates that the manufacturing sector is expanding, according to the ISM.
Survey respondents cited strong sales of consumer goods, trucks and recreational vehicles, but several said that the dock labor dispute and gridlock at major container ports is hurting production.
“West Coast port issues have greatly impacted our incoming materials. We are air freighting many parts from Japan and Asia to support production while parts sit at the dock,” an unidentified fabricated metal products company said.
Two respondents from the textile mill and machinery industries said the port situation is adversely affecting imports of supplies from Asia.
For 2014, the PMI averaged 55.8, the best since the first full reading after the recession.
Lower crude oil prices has slowed some sales of chemicals as customers hold off in anticipation of negotiating lower prices and oil-related equipment, but some commenters said they anticipated the extra spending power in the U.S. economy to ultimately increase manufacturing. A strong dollar, in addition to economic weakness in several parts of the world, is also slowing demand for U.S. exports.
The New Orders Index registered 57.3 percent, a decrease of 8.7 percentage points from the November reading of 66 percent. The Production Index registered 58.8 points, 5.6 points off the November reading of 64.4 percent.