WASHINGTON (Reuters) - U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.
The Institute for Supply Management (ISM) said on Wednesday its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October.
A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 61.0.
Global economies' simultaneous recovery from the COVID-19 pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.
The ISM survey's measure of supplier deliveries slipped to a reading of 72.2 from 75.6 in October. A reading above 50% indicates slower deliveries.
The long delivery times kept inflation at the factory gate bubbling. The survey's measure of prices paid by manufacturers fell to a still high 82.4 from a reading of 85.7 in October.
Factories are easily passing the increased production costs to consumers and there are no signs yet of resistance.
Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that "the risk of higher inflation has increased," adding that the U.S. central bank should consider accelerating the pace of winding down its large-scale bond purchases at its next policy meeting in two weeks.
The Fed's preferred inflation measure surged by the most in nearly 31 years on an annual basis in October.
The ISM survey's forward-looking new orders sub-index climbed to a reading of 61.5 last month from 59.8 in October. Customer inventories remained depressed.
With demand robust, factories hired more workers. A measure of manufacturing employment rose to a seven-month high. This, combined with consumers' robust perceptions of the labor market last month suggest job growth accelerated further in November.
Worker shortages, however, remain a constraint. There were 10.4 million unfilled jobs at the end of September. The Labor Department is scheduled to publish its closely watched employment report for November on Friday.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)