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Economic Report: ‘Inflation is out of control:’ U.S. factories grow at slowest pace in 18 months as labor and supply woes fester

The numbers: The ISM barometer of American factories fell 1.7 points to 55.4% in April and showed the industrial side of the economy grew at the slowest clip in 18 months, reflecting broad supply and labor bottlenecks and intense inflationary pressures.

Economists polled by The Wall Street Journal forecast the index to rise to 57.8% from a one-and-a-half year low of 57.1% in March. Any number above 50% signifies growth. 

The report, compiled by the Institute for Supply Management, is seen as a mirror of the health of the U.S. economy. The index has been very strong for most of the past two years and is still historically high, but it’s shown some weakening lately.

Big picture: Manufacturers still have plenty of demand for new cars, appliances, metal parts and other industrial goods.

Yet they are still struggling to obtain enough supplies on time and labor and material prices are rising due to the highest inflation in 40 years. Big lockdowns in China and the war in Ukraine could also make the problems worse.

Key details:

The index of new orders slipped 0.3 points to 53.5%.

The production barometer dipped 0.9 points to 53.6%.

The employment gauge sank to 5.4 points to 50.9%.

The prices index, a measure of inflation, dropped 2.5 points to a still-high 84.6%.

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.25%

and S&P 500
SPX,
-0.35%

fell slightly in Monday trades. Stocks have been under pressure for the past few weeks and are well off last year’s record highs.

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