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Omicron Makes Supply-Chain Improvement Uncertain

Could the arrival of the omicron variant of COVID-19 threaten the supply-chain easing that began last month? That’s the question on many manufacturers’ minds in recent days, according to The Wall Street Journal (subscription).

The good news: Production, orders and employment growth all picked up from October to November, according to the Institute for Supply Management, whose index of factory activity increased to 61.1 last month (from October’s 60.8).

  • “Better still, an index of supplier delivery times, while still elevated, fell from its October level. That actually exerted a drag on the overall level of the manufacturing index, since slower delivery times are usually a sign that things are getting better. At the moment, however, the opposite is true, and the decline in the index suggests that just maybe supply-chain problems are easing.”
  • Shipping rates have also begun to come down from historic highs.

The omicron caveat: If the omicron strain touches off another global infection surge, we could see port closures, factory shutdowns, more shortages and more inflation.

  • However, on Tuesday, Federal Reserve Chairman Jerome Powell signaled that “the central bank is still considering speeding up the reductions, or tapering, of its asset purchases.”
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