U.S. factories are having too much of a good thing, with surging demand leading to system-wide bottlenecks that are weighing on business and potentially the broader economy.

The latest evidence came Tuesday in the Institute for Supply Management’s April manufacturing survey, which showed that despite robust orders, production cooled as suppliers’ delivery times lengthened, backlogs mounted, materials prices picked up and hiring slowed. Together, these forces could restrain manufacturing, which accounts for about 12 percent of the U.S. economy, after solid job gains and global growth spurred a wave of optimism and filled order books over the past year. The constraints -- which threaten profit margins -- may also blunt the effects of the $1.5 trillion tax cut for corporations and individuals, which was signed by President Donald Trump in December and was aimed partly at revving up factory investment even faster.

Federal Reserve policy makers may be weighing the factory data as they conclude a two-day meeting in Washington on Wednesday. They’re expected to leave interest rates unchanged, then raise them at their next gathering in June for the second time this year, amid the lowest unemployment rate since 2000 and inflation in line with their target.

https://www.bloomberg.com/news/artic...m-demand-surge