Inflation Shows Signs of Cooling in U.S. Manufacturing Data

(Bloomberg) -- Inflation pressures in U.S. manufacturing showed signs of easing at the end of 2021, though producers are still grappling with high prices and long delivery times.

Institute for Supply Management gauges of supplier deliveries and prices paid for materials both fell in December to their lowest levels in more than a year, according to a report released Tuesday. That dragged down the group's headline measure of factory activity to the lowest since January 2021.

IHS Markit figures on Monday showed a measure of input prices declined in December to a six-month low.

Together, the data mark a respite for manufacturers that have struggled to keep up with demand because of materials shortages, hiring challenges and transportation bottlenecks. However, delivery times and material costs are still elevated, and the omicron variant risks further supply-chain disruptions from quarantined and sick workers.

“This moderation suggests that we have moved past the most intense stages of the supply chain issues, although it doesn't look like things have fully normalized,” JPMorgan Chase & Co. economist Daniel Silver said in a note.

The ISM's prices index plummeted 14.2 points, the most in a decade, to 68.2. Readings above 50 indicate growth. It's still “too soon” to point to improved supply issues from the December reading, Citigroup Inc. economists Veronica Clark and Andrew Hollenhorst said in a note.

Chemicals, plastics and steel drove the drop in prices, Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee, said on a call with reporters. While the survey isn't yet reflecting the omicron effect, it will “definitely” impact the manufacturing economy, he said.