Mar 1, 2021 - Economy & Business

The manufacturing boom's bottleneck

Illustration of factory line
llustration: Rebecca Zisser/Axios

The manufacturing sector has bounced back from its pandemic knockout. But as the economy reopens, factories can't keep up with orders.

Why it matters: The materials manufacturers need are hard to find and prices for them are soaring.

  • The shortages could delay orders for companies relying on them, while the price surges could ripple out to the consumer.

Stunning stat: An important gauge of manufacturing activity in America matched the highest level in 17 years last month, a closely eyed survey by the Institute for Supply Management showed Monday.

Context: Last April — at the onset of the pandemic — the industry was in the worst shape since the global financial crisis.

  • The biggest winners since then: food and beverage manufacturers, along with makers of computers, chemicals and metals.
  • Losers: petroleum and coal manufacturers — the only sector to contract last month.

Yes, but: Material shortages could prevent factories from making good on the surge in orders.

What they're saying: “Everything is a mess, and we are seeing wide-scale shortages," one appliance and electrical equipment maker said.

Plus: Factories have increasingly reported paying more for materials, with the latest data showing manufacturers paying the most since 2008.

What's going on: Companies are "not able to have as many people at the sawmills or as many people in the foundries making steel" because of COVID-19 work restrictions, leading to manufacturers' shortages, Ben Ayers, an economist at Nationwide, tells Axios.

What to watch: The problems come as the Biden administration prioritizes revitalizing the sector and boosting jobs — promises made by his predecessor.

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