Service sector

Supply chain issues may be easing, but the service sector still has some way to go

There’s a question we keep asking as the effects of the pandemic wane…then rise…then rise again: Is this economy more asset-driven—despite all this blockchain madness? supply – or by services?

This week, we took a look under the hoods of these two sectors. On Monday, the PMI for the manufacturing sector came out, followed on Wednesday by the PMI for the services sector. Both are from IHS Markit and both were eyeing December as the omicron coronavirus variant gained momentum.

While many of us were scouring store shelves for Christmas gifts that month, Luke Kawa and his family decided to save themselves the headache and have Christmas.

“So I wasn’t as stuck in the supply chain grunts as everyone else could have been,” said Kawa, strategist at UBS Asset Management. He thinks the growls might pick up.

“It might be a bit, you know, the darkest time before dawn,” he said.

The December PMIs confirm this theory. On the positive side, according to Chris Williamson, Chief Economist at IHS Markit, “manufacturing, which has lagged, actually saw a recovery in December because many supply chain issues … are starting to ease. “.

But the picture is a little less rosy in the service sector, where so-called backlogs persist. IHS defines them as “orders received but not fulfilled” that companies are unable to start or complete.

“There’s been an issue of not having the capacity to meet customer demand,” Williamson said, adding that’s partly because it’s still difficult to find and keep workers.

Despite these kinds of pressures, it means we’re on the path to more moderate growth, according to Dean Baker, senior economist at the Center for Economics and Policy Research.

And this is a good thing. “We know the economy can’t sustain the kind of growth we’ve seen in 2021,” he said.

Baker said he wanted to see a more moderate and sustainable level of growth.