Manufacturing settled into a solid growth range in the first month of the new year as demand for products continues to expand, labor- and COVID-related constraints notwithstanding.
The Institute For Supply Management’s monthly PMI Index checked in at 58.7% for January. The PMI was down 1.8 percentage points from December’s 60.7% reading, but still was more than 15% above the 50% threshold for growth in the index and marked the eighth straight month of growth for the PMI.
“The manufacturing economy continued its recovery in January,” said Timothy Fiore, chairman of ISM Manufacturing Business Survey Committee, in a press release. “Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential.
“However, panel sentiment remains optimistic (three positive comments for every cautious comment), similar to December levels,” Fiore added. “Demand expanded, with the New Orders Index growing at a strong level, supported by the New Export Orders Index expanding, Customers’ Inventories Index remaining in ‘too low’ territory and at a level considered a positive for future production, and the Backlog of Orders Index remaining at high levels.”
Labor continues to be a specific strain on growth, Fiore noted. “The Employment Index expanded for a second straight month, but panelists continue to note difficulties in attracting and retaining labor at their companies and supplier facilities,” he said. “Labor market difficulties at panelists’ companies and their suppliers will continue to restrict the manufacturing economy expansion until the (COVID-19) crisis abates.”
Committee members from various sectors said that business remained strong from an orders standpoint despite challenges on the labor front. Among the committee comments:
- “Supplier factory capacity is well utilized. Increased demand, labor constraints and upstream supply delays are pushing lead times. This is more prevalent with international than U.S.-based suppliers.” (Computer & Electronic Products)
- “Business remains strong. Manufacturing running at full capacity.” (Chemical Products)
- “Very strong demand with limitations in supply to meet increased demand.” (Transportation Equipment)
- “Labor continues to be one of our largest challenges.” (Food, Beverage & Tobacco Products)
- “Our current business demand is going way past pre-COVID-19 [levels].” (Fabricated Metal Products)
- “Business is very good. Customer inventories are low, with a significant order backlog through April. Supply base is struggling to keep up with demand, disrupting our production here and there. Raw material lead times have been extended. COVID-19 continues to cause challenges throughout the supply chain. Huge logistics challenges, especially in getting product through ports and in getting containers. We are seeing significant cost increases in logistics and raw materials.” (Machinery)
- “We have had an increase in employees testing positive for COVID-19, negatively impacting manufacturing.” (Miscellaneous Manufacturing)
- “2020 growth at 5% during a very challenging and volatile year. 2021 is expected to bring growth at a 7% or even greater pace. Logistics is the critical concern, but we are currently abating risk.” (Electrical Equipment, Appliances & Components)
- “January 2021 started with strong orders for plastic components in auto, electrical and other sectors. The industry outlook is optimistic. Looking at investing in new equipment for anticipated demand later this year. Reshoring is taking hold, with new customer potential.” (Plastics & Rubber Products)
- “Business is improving, but we are still struggling with a shortage of available labor.” (Primary Metals)