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The economy slowed in August, the ISM shows, but the scarcity is a bigger catch than the delta

Hotels, restaurants, retailers, and other businesses that employ most Americans grew slower in August, but the ongoing labor and supply shortages appeared to be a bigger culprit than the Delta strain of coronavirus.

A survey of service-minded companies fell from a record 64.1% in July to 61.7% last month, the Institute for Supply Management said on Friday. That was in line with the forecast of the economists polled by the Wall Street Journal.

Any reading above 50% signals expansion, and numbers above 60% are exceptional.

A spike in Delta cases in late summer appeared to hold back the recovery of the U.S. economy, but the ISM poll suggests the virus wasn’t as big a factor as a weak August employment report implied.

“The demand for labor is clearly quite high, but the supply remains limited as people delay their return to work,” said Jeffferies LLC money market economist Thomas Simons.

Read: The US creates only 235,000 jobs in August as the delta reduces recruitment opportunities and slows the economy

Most executives surveyed blamed the persistent shortages of materials and labor that prevented them from providing enough services to meet high customer demand. This scarcity has also driven costs up sharply and contributed to the steepest rise in inflation in the United States in 30 years.

Few executives named Covid as one of their biggest limitations.

“Material and labor shortages continue to hinder productivity. Price increases are ubiquitous and repetitive, ”said a construction company executive.

Read: Consumer confidence drops to 6-month lows on delta fear and inflation

Likewise: US inflation is at its highest level in 30 years

“Disruptions in the supply chain – including labor shortages in manufacturing, delays in logistics and shortages of materials to manufacture products – are seriously disrupting our business,” a food service executive told ISM.

The Dow Jones Industrial Average DJIA, -0.14% and the S&P 500 SPX, -0.06% fell in Friday trading after a weak August employment report.

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