Manufacturing remained solidly in growth mode in April, but concerns over a global semiconductor shortage and general supply chain issues did drag the monthly PMI Index back from its near-record level in March.
The Institute for Supply Management reported that its monthly PMI Index fell 4.0 percentage points in April to 60.7%. That still is more than 20% above the index’s 50% baseline for growth and reflects a generally strong manufacturing sector just one year removed from the index’s crash in the opening days of the COVID-19 pandemic.
The New Orders and Production indexes both slipped in April from their March levels, while the Backlog of Orders Index rose in April.
That was the major issue facing suppliers last month, said Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee.
“Survey committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to (COVID-19) impacts limiting availability of parts and materials,” Fiore said in a press release. “Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”
Fiore noted that the six largest manufacturing industries—Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; and Petroleum & Coal Products—all registered moderate to strong growth in April.
“Manufacturing performed well for the 11th straight month, with demand, consumption and inputs registering strong growth compared to March. Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending. This is due to very high demand and output restrictions, as supply chains continue to respond to strong demand amid COVID-19 impacts,” said Fiore.
Committee members also noted the struggles for components in general and semiconductors in particular. Among the committee comments:
- “The current electronics/semiconductor shortage is having tremendous impacts on lead times and pricing. Additionally, there appears to be a general inflation of prices across most, if not all, supply lines.” (Computer & Electronic Products)
- “Upstream producers/suppliers are back online and working towards full rates. Demand is outpacing supply and will continue into the third quarter, when the supply chain is expected to be refilled. Supply/demand should be more balanced in Q3/Q4, but demand will continue as customers run hard to meet their demand and rebuild inventory.” (Chemical Products)
- “Continued strong sales; however, we have had to trim some production due to the global chip shortage. Hasn’t affected inventories greatly yet, but a continued decrease will begin to reduce available inventories if we don’t recover chip supply shortly.” (Transportation Equipment)
- “Business is picking up as restaurants open.” (Food, Beverage & Tobacco Products)
- “Oil production has been steady, along with market prices and capital expenditures.” (Petroleum & Coal Products)
- “Steel prices are crazy high. The normal checks on the domestic steel mills are not functioning—imported steel is distorted by the Section 232 tariffs.” (Fabricated Metal Products)
- “It’s getting much more difficult to supply production with materials that are made with copper or steel. Lots of work on the floor, but I am worried about getting the materials to support.” (Electrical Equipment, Appliances & Components)
- “Market capacity in most areas is oversold, with no realistic improvement on the horizon. In fact, it appears that demand will continue to strengthen, leading to more significant disruptions.” (Furniture & Related Products)
- “In 35 years of purchasing, I’ve never seen everything like these extended lead times and rising prices—from colors, film, corrugate to resins, they’re all up. The only thing plentiful at present, according to my spam filter, is personal protective equipment.” (Plastics & Rubber Products)
- “The metals markets remain very challenging at best. Shortages of raw materials have increased, especially in aluminum and carbon steel. Prices continue to rapidly increase. Transportation and trucking [are] also a big challenge.” (Primary Metals)
- “Demand continues to be very strong. Supply chain delays hamper our availability and ability to sell more.” (Machinery)