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Suppliers of everything from engines to electronic components aren’t keeping up with a boom in U.S. manufacturing, which has lifted demand in markets such as energy, mining and construction. As a result, some manufacturers are idling production lines and digesting higher costs.
Many industrial companies have reported strong sales and profits in recent weeks, and the pace of factory hiring has more than doubled this year compared with the first seven months of 2017.
However, deliveries from suppliers have slowed for 22 consecutive months through July, according to the latest survey of U.S. manufacturers by the Institute for Supply Management. More than one-quarter of respondents said it took longer for materials to arrive in July than in June. Machinery was the hardest-hit sector.
These bottlenecks were evident in the earnings reports manufacturers delivered over the past few weeks.
Terex Corp. said its mobile-crane-making unit incurred a loss in the second quarter as parts shortages hurt efficiency at its plants. “The reality of it is that elements of our supply base could not keep up,” Chief Executive John Garrison said on an Aug. 1 earnings call.
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