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Manufacturing Steadies as Plants Successfully Adapt

Oct. 1, 2020
The PMI slips to 55.4%, but remains solidly in growth mode.

Manufacturing’s rebound from its COVID-19 crash continued in September, as the Institute for Supply Management’s monthly PMI Index remained solidly in growth territory at 55.4%.

While the September figure was down 0.6 percentage points from August’s 56.0% reading, ISM officials said the overall sector remained on solid footing.

“Manufacturing performed well in the month with demand, consumption and inputs registering growth indicative of a normal expansion cycle,” said Timothy Fiore, chairman of the ISM’s Manufacturing Business Survey Committee. “While certain industry sectors are experiencing difficulties that will continue in the near term, the manufacturing community as a whole has learned to conduct business effectively and deal with the variables imposed by the COVID-19 pandemic.”

After the PMI plummeted in April following the shutdown of many business during the early days of the pandemic, manufacturing has gradually recovered. The PMI has been solidly above the 50% growth level for the past four months. In the September report, growth in new orders and production leveled off, but remained in solid shape.

“After the coronavirus pandemic brought manufacturing activity to historic lows, the sector continued its recovery in September,” Fiore said in a press release. “Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories and are becoming more proficient at maintaining output. Panel sentiment was optimistic (2.3 positive comments for every cautious comment), an improvement compared to August.”

While supply chain pressures continue, committee members said that was the lone area of concern in a generally positive outlook. Among the committee member comments:

  • “Still struggling with long lead times for components coming from China [contract manufacturers].” (Computer & Electronic Products)
  • “Volume remains lower than one year ago but has steadily improved over the past two periods.” (Chemical Products)
  • “Business is booming, and the supply chain has been caught off guard. We are working closely with our suppliers to ensure supply and try to control costs. The resin industry, along with plastics, is driving cost increases and scarce availability.” (Transportation Equipment)
  • “Our business has not begun to recover.” (Petroleum & Coal Products)
  • “Overall business conditions are improving, but not at the rates we saw them decline.” (Fabricated Metal Products)
  • “Our customer order intake is increasing significantly for deliveries in the first half of 2021. Outlook is generally positive.” (Machinery)
  • “Retail sales remain strong, but food service is still down about 15 percent year-over-year. All of our factories are still struggling with manning shifts due to positive COVID-19 cases and/or quarantine because employees came in contact with someone who contracted the virus.” (Food, Beverage & Tobacco Products)
  • “Demand remains high, strong finish to 2020 projected, with an even stronger 2021 fiscal year. Prices have increased in certain categories, but no major price increases of our own have been implemented yet. We are seeing an uptick in reshoring opportunities in the third quarter across various industries and products.” (Electrical Equipment, Appliances & Components)
  • “We are seeing a marked increase in international demand in Q4 compared to Q2 and Q3. Still not at historical levels; however, a positive outlook.” (Paper Products)
  • “Raw material shortages, especially of hardwood logs, are starting to impact overall supply. Domestic market demand is fragmented but remains sound. Export demand, especially to China, is robust.” (Wood Products)
  • “Business has continued to be strong, with September following August. October is also shaping up to be a good sales month as well.” (Plastics & Rubber Products)

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