The growth of the economy in the U. S. started slowing down fast in the first several weeks of the year because of disruptions in the supply chain, increase in prices, and shortage of labor connected to the large number of Covid-19 infections, according to information from a survey of purchasing managers given on Monday.
The United States IHS Markit flash composite purchasing managers index, The first of several closer looks at the growth of the economy for this year, dropped to 50.8 in Jan. from 57.0 in Dec., drastically under what was expected, and indicating almost zero growth in the economy. A reading of 56.7 had been forecast by economists.
“Soaring Covid-19 cases have brought the United States economy close to a complete stop at the first of the year, with company’s disrupted by more delays in the supply-chain, and employee shortages, to manage the spread of Omicron there are new restrictions adding to firms’ headwinds,” stated Chris Williamson.
The flash composite calculates the activity in the economy for both the services and manufacturing parts of the economy. Growth is indicated when readings are above 50.
The gauge of company’s activity in the services sector dropped to a low of 50.9 in eighteen months, a little above the zero-change mark of fifty. The manufacturing measurement dropped to 55 from 57.7 in December, which was the lowest amount in fifteen months.
“The slowing down of the output growth was wide, with both manufacturing and service businesses reporting almost-stalled output as the high increase in Covid cases connected to the Omicron wave caused continuing supply problems and labor shortages were increasing because of renewed pandemic control measures,” IHS Markit said in its report.
Manufacturers said that new sales increase was held back a lot of times because of less demand due to cost increases and trying to work through inventories.
Service providers said that the growth was slowing down because of labor shortages and employee absences connected to the omicron increase. Demand stayed strong, with the expanding of new orders.
Supply chains have kept falling but at a slower pace according to IHS Markit.
“Because of this the optimism in manufacturing has lifted about the next year to the highest for more than a year, and it has also helped to make the rate of raw material cost to extremely come down. Even with the survey pointing toward a disappointing beginning for the year, there are several good signals for the close future outlook,” Williamson said.