“What started out as a shortage of semiconductors affecting mostly the auto industry is now a shortage of basically everything, including lumber, metals and plastics,” said Michael Pearce, senior U.S. economist at Capital Economics.
But Pearce noted that even with the decline, the manufacturing index remained at a high level that was consistent with growth in the overall economy of a robust 6%.
The government reported last week that the economy, as measured by the gross domestic product, grew by a solid 6.4% between January and March with many analysts expecting growth could top 10% in the current quarter as the economy re-opens further.
Timothy Fiore, chair of the ISM manufacturing survey committee, said that companies are not able to meet demand because of supply constraints on the materials they need and a shortage of labor. He predicted businesses will start pushing wages higher to attract workers and will also start paying more for raw materials.
“Companies will pay whatever it takes to get people and materials,” he said. “You can't lose market share because once you lose it, it is hard to get it back.”
The ISM report showed that optimistic comments about the future compared with cautious statements from companies came in at a ratio of 11- to-1 up from an 8-to-1 ratio in March.
All six of the biggest manufacturing industries including fabricated metal products, chemical products, food and beverages, and computer and electronic products, registered moderate to strong growth in April.