Pogonici/Dreamstime
Industry growth chart

Manufacturing Growth Spurt Overcomes Obstacles

Nov. 1, 2021
The PMI Index shows expansion despite the twin supply chain and employment crises.

Manufacturing continues its strong showing in 2021 despite continued pressure from supply chain and employment concerns. The monthly PMI Index from the Institute for Supply Management remained well above the 20% growth level in October, posting a reading of 60.8%. While that was down fractionally from September’s 61.1% reading, the PMI is solidly in growth range, indicating manufacturers are overcoming—or at least learning to live with—the issues they continue to face.

“Business Survey Committee panelists reported that their companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand,” said Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee, in a press release. “All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.

“Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential,” Fiore added. “However, panel sentiment remains strongly optimistic.”

The overall PMI was above the 20% growth level for the eighth time in the last 12 months. The Employment Index rose 1.8% in October to 52.0%, still below strong growth levels. Fiore noted that demand continues to expand with growth in both the New Orders Index and the New Export Orders Index.

“As workers opt for more attractive job opportunities, panelists’ companies and their suppliers struggle to maintain employment levels,” Fiore said. “Disruptions from COVID-19, primarily in Southeast Asia, continue to have an impact on many industry sectors. Congestion at ports in China and the U.S. continues to be a headwind, as transportation networks remain stressed. Demand remains at strong levels, despite increasing prices.”

Committee members echoed those sentiments, particularly as they apply to industries where supply chain issues are among the driving forces for growth. Among the comments:

  • “Global supply chain issues continue. Getting anything from China is near impossible — extreme delays. Microchip and circuit breaker shortages continue and are expected to continue into 2022.” (Computer & Electronic Products)
  • “Business is getting stronger, but the supply chain is getting worse every day.” (Chemical Products)
  • “Strong sales continue; however, we have diverted chips (semiconductors) to our higher-margin vehicles and stopped or limited the lower-margin vehicle production schedules.” (Transportation Equipment)
  • “Import costs and delays hurting business, requiring more safety stock for uncertainty. Rolling blackouts in China starting to hurt shipments even more.” (Food, Beverage & Tobacco Products)
  • “Domestic original equipment manufacturer (OEM) capital-expenditure spending is trending up for our business. We are seeing an increase of capital equipment with life spans of more than 10 years in the fourth quarter.” (Fabricated Metal Products)
  • “Demand continues to be strong, but we continue to be held back by supply chain issues — logistics delays, as well as capacity and labor issues at suppliers.” (Electrical Equipment, Appliances & Components)
  • “Business remains strong, with brisk incoming orders. We have become much more supply driven versus demand driven, due to shortages of labor, materials and freight. Costs continue to increase on all fronts, and we are considering our third price increase of the year for our customers.” (Furniture & Related Products)
  • “Customer demand remains high. COVID-19 related supply chain issues still hamper our ability to meet demand. Labor is still difficult for our suppliers to obtain, and labor costs are rising.” (Machinery)
  • “Demand for our products remains strong, but we continue to struggle to secure enough raw material to keep our manufacturing lines running.” (Miscellaneous Manufacturing)
  • “My prediction is that 2022 will be very similar to 2021 — similar demand, constrained supply, restricted logistics and rampant inflation.” (Plastics & Rubber Products)

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