US factories struggle to meet demand as shortages slam production

Nanotronics manufacturing
View of Nanotronics high-tech manufacturing hub during mayor visit at Brooklyn Navy Yard.

  • US manufacturers continued to recover in April, but new risks are slowing their rebound.
  • Popular gauges of industry growth showed supply-chain issues and worker shortages hindering production.
  • Reopening will ease concerns over bottlenecks and massive backlogs, Oxford Economics said.
  • See more stories on Insider’s business page.

Factories can’t keep up with the reopening of the American economy.

Popular metrics tracking the US manufacturing industry indicated strong growth in April. The Institute for Supply Management’s purchasing managers’ index dipped 4 points to 60.7, while IHS Markit’s own gauge rose to a record high of 60.5. Readings below 50 indicate industry contraction, while those above the level signal growth.

The April reports further support the industry’s resilience throughout the pandemic, but underlying trends point to growing risks at American factories. Supply-chain disruptions and raw-material shortages plagued manufacturers throughout the month as the broader economy rebounded. New orders accelerated even further amid stronger client demand, leading backlogs to climb at their second-fastest rate since IHS Markit began collecting data.

“In 35 years of purchasing, I’ve never seen anything like these in terms of extended lead times and rising prices,” one business in the plastics and rubber sector told ISM. Another remarked that they’re “worried about getting the materials to support” such strong sales.

At the same time, gauges of manufacturing-industry employment slowed last month, leaving firms to address burgeoning order books with inadequate headcounts. The hiring woes, coupled with historic supply chain pressures, dragged IHS Markit’s measure of business confidence to a three-month low.

The labor-force shortfall mirrors dynamics seen throughout the service industry as well. Businesses from restaurants to rideshare companies have reported difficulty in hiring as the economic recovery ramps up. Payroll growth is expected to near 1 million new jobs in April, but worker shortages could curb the labor market’s rebound sooner than economists expected.

The growing backlogs and rising material costs are likely to augment the sharp rise in inflation that the Federal Reserve has been warning of for months. Officials have said that reopening and stimulus would boost price growth in the near term before this “transitory” surge fades away.

Manufacturers reported passing down higher input costs to their clients, adding to the inflationary dynamics seen elsewhere in the economy. The rate of sector-specific inflation cooled slightly from March, but still registered at its second fastest on record, according to IHS Markit.

Still, experts see most of the industry pressures easing as the economy settles into a new normal. The continued rollback of economic restrictions will help firms more effectively address issues curbing production, Oren Klachkin, lead US economist at Oxford Economics, said.

“Supply-chain stress will hinder, but not derail, manufacturing’s expansion,” he added. “Bottlenecks will gradually open up as the global economy returns to full health.”

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A major Apple supplier is reportedly using forced labor from thousands of Uighur workers to make glass for iPhones

Apple CEO Tim Cook in China, March 2019
Apple CEO Tim Cook at the Economic Summit held for the China Development Forum in Beijing in March 2019.

A major Apple supplier is using forced labor from thousands of Uighur workers in its factories, a new report from the Tech Transparency Project found.

“Our research shows that Apple’s use of forced labor in its supply chain goes far beyond what the company has acknowledged,” Katie Paul, the director of the Tech Transparency Project, told The Washington Post.

Evidence of Lens Technology’s use of forced labor was available publicly, hidden in plain sight as government propaganda in news media, according to the Tech Transparency Project. Lens has for years supplied Apple with glass for iPhones, and the company also works with Amazon and Tesla, The Post noted.

Read more: How Apple, Google, and other browser makers are quietly duking it out over the future of the web

The group’s report details a variety of Chinese media reports that portray worker transfers as voluntarily relocating, often with a positive spin.

Apple didn’t respond to Business Insider’s request for comment, but a representative, Josh Rosenstock, told The Post: “Apple has zero tolerance for forced labor. Looking for the presence of forced labor is part of every supplier assessment we conduct, including surprise audits. These protections apply across the supply chain, regardless of a person’s job or location. Any violation of our policies has immediate consequences, including possible business termination. As always, our focus is on making sure everyone is treated with dignity and respect, and we will continue doing all we can to protect workers in our supply chain.”

Apple has been repeatedly accused of labor issues in China and has even broken business relationships with major suppliers as a result. As recently as  March, a major report found that Apple benefited from forced Uighur labor through its Chinese suppliers.

Though Apple has taken a public stance against these practices, the company reportedly joined Coca-Cola and Nike in lobbying efforts to weaken a bill designed to ban US companies from relying on Chinese forced labor.

Read The Washington Post’s full report here.

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