Growth hampered by “supply chain disruptions, capacity constraints, inflation, logistical challenges, labor shortages”

Here’s what the leaders of these industries have said.

By Wolf Richter for WOLF STREET.

Growth in February in companies outside the manufacturing sector was held back “by supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages,” the ISM Services PMI reported today.

The ISM Services PMI is based on a panel of business leaders (“respondents”) who report how their own businesses are performing this month compared to the previous month. The panel includes executives from companies of all sizes across the wide range of industries other than manufacturingranging from agriculture and construction to professional, scientific and technical services (industries are listed below).

“These conditions affected the ability of panelists’ businesses to meet demand, resulting in slower business activity and economic growth,” the ISM report said.

The report says these industries overall grew at an above-average pace set in the 2010-2019 decade, but slower than the breakneck record pace that began in March 2021.

And it’s everywhere now: the inability to meet demand – and even accept new orders – due to “supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages. And they put a brake on the growth of business and the economy.

Here are some of the things the leaders said:

Senior Manager of Professional, Scientific and Technical Services“Staff shortages, supply chain disruptions and rising inflation continue to impact the global economy. Businesses are struggling to hire direct employees and unpaid labor as wages continue to rise for both. The Big Quit is real: Employees, contractors and consultants continue to quit their jobs and commitments for better-paying opportunities with more flexible work options. Millions of light manufacturing jobs remain open in the United States, with limited interest from job seekers. Severe labor shortages are expected through 2022. Companies need to increase wages and salaries to attract talent and get the job done. Faster wage growth should lead to higher inflation.

Frame Under Construction: “We get price increases without notice. For example, our engineered wood products supplier gave us a 10-20% raise (based on SKU), effective immediately. We are also struggling to get materials. Suppliers cite low employee attendance, high employee turnover, and positions that are open longer than normal as they struggle to fill them.

Senior executive in accommodation and catering“Rising raw materials, labor shortages, wage increases and transportation issues remain the main issues affecting our operations and prices.”

Framework in agriculture, forestry, fishing and hunting“Supply chain challenges continue to drive product inventory down and costs up. Challenges are at their highest since the onset of COVID-19.”

Senior executive in arts, entertainment and recreation“We expect 2022 to be busier than 2021. Our business volume should start to increase significantly in March.”

Framework in educational services: “Inflation contributes to budget constraints, supply chain restrictions and labor shortages.”

Executive in Finance & Insurance: “Staff turnover within our company and with our suppliers is causing delays in decisions and orders.”

Health care and social assistance executive“As the COVID-19 surge begins to loosen its grip, we expect to resume elective surgeries soon. Demand is still high as these procedures were delayed while the surge was occurring.”

Framework in public services: “Seem to be on the rise since COVID-19 from an absenteeism perspective. Still facing long lead times for wire, polyvinyl chloride (PVC), steel, transformers and meters. The winter weather did not impact productivity levels.

Here are the 18 categories of the PMI ISM Services. They represent a large part of the American economy:

  • Agriculture, Forestry, Fishing & Hunting;
  • Mining;
  • Utilities;
  • Construction;
  • Wholesale trade;
  • Retail business;
  • Transportation and warehousing;
  • Information;
  • Finance & Insurance;
  • Real estate, rental and leasing;
  • Professional, scientific and technical services;
  • Business Management & Support Services;
  • Educational services;
  • health care and social assistance;
  • Arts, entertainment and recreation;
  • accommodation and catering services;
  • Public administration;
  • Other services (such as repair of equipment and machinery, personal care services, dating services…)

Todd Miller, president of Isaiah Industries, an Ohio-based manufacturer of metal roofing shingles for residences and commercial buildings, reported on WOLF STREET on the challenges his company faces in terms of shortages and chain issues. procurement, which he summarized:

“The end result is that we’re doing our best, and I believe our suppliers are doing their best, but the system has been pushed beyond its limits. If consumer demand for our products remains high, and we expect it to be, I don’t see how we can deliver what customers want this year.

“At the same time, rapidly escalating raw material costs are pinching margins. We cannot pass price increases as quickly as we see them. And it’s not just metals and coatings, but also packaging, transport and, well, just about everything.

“It’s really not supposed to work that way!” The system is broken,” he said. And there are a lot of business people who would probably agree with that.

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