U.S. Manufacturing PMI® at 59.9%
Economic activity in the manufacturing sector grew in August, with the overall economy notching a 15th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The August Manufacturing PMI® registered 59.9 percent, an increase of 0.4 percentage point from the July reading of 59.5 percent. This figure indicates expansion in the overall economy for the 15th month in a row after contraction in April 2020. The New Orders Index registered 66.7 percent, increasing 1.8 percentage points from the July reading of 64.9 percent. The Production Index registered 60 percent, an increase of 1.6 percentage points compared to the July reading of 58.4 percent. The Prices Index registered 79.4 percent, down 6.3 percentage points compared to the July figure of 85.7 percent; this is its first reading below 80 percent since December 2020 (77.6 percent). The Backlog of Orders Index registered 68.2 percent, 3.2 percentage points higher than the July reading of 65 percent. The Employment Index indicated contraction at 49 percent, 3.9 percentage points lower compared to the July reading of 52.9 percent. The Supplier Deliveries Index registered 69.5 percent, down 3 percentage points from the July figure of 72.5 percent. The Inventories Index registered 54.2 percent, 5.3 percentage points higher than the July reading of 48.9 percent. The New Export Orders Index registered 56.6 percent, an increase of 0.9 percentage point compared to the July reading of 55.7 percent. The Imports Index registered 54.3 percent, an 0.6-percentage point increase from the July reading of 53.7 percent.”
Fiore continues, “Business Survey Committee panelists reported that their companies and suppliers continue to struggle at unprecedented levels to meet increasing demand. All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products. The new surges of COVID-19 are adding to pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — that continue to limit manufacturing-growth potential. However, optimistic panel sentiment remained strong, with eight positive comments for every cautious comment. Demand expanded, with the (1) New Orders Index growing, supported by continued expansion of the New Export Orders Index, (2) Customers’ Inventories Index remaining at very low levels and (3) Backlog of Orders Index staying at a very high level. Consumption (measured by the Production and Employment indexes) declined in the period, with a combined 2.3-percentage point decrease to the Manufacturing PMI® calculation. The Employment Index returned to contraction after one month of expansion; hiring difficulties at panelists’ companies were the most significant hurdle to further output in August, as validated by the growth in inventory accounts. Inputs — expressed as supplier deliveries, inventories, and imports — continued to support input-driven constraints to production expansion, at slower rates compared to July. The Supplier Deliveries Index softened while the Inventories Index made a strong move into expansion territory due to improvements in raw material deliveries as well as work in progress inventory being held longer due to key part shortages. The Prices Index expanded for the 15th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.
“All of the six biggest manufacturing industries — Computer & Electronic Products; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Petroleum & Coal Products, in that order — registered moderate to strong growth in August.
“Manufacturing performed well for the 15th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of unprecedented obstacles. Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to difficulties in hiring and a clear cycle of labor turnover as workers opt for more attractive job conditions. Disruptions from COVID-19, primarily in Southeast Asia, are having dramatic impacts on many industry sectors. Ports congestion in China continues to be a headwind as transportation networks remain stressed. Demand remains at strong levels, despite increased prices for nearly everything,” says Fiore. The 15 manufacturing industries reporting growth in August — in the following order — are: Furniture & Related Products; Computer & Electronic Products; Machinery; Primary Metals; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Wood Products; Printing & Related Support Activities; Paper Products; and Petroleum & Coal Products. The two industries reporting a decrease in August compared to July are Textile Mills; and Nonmetallic Mineral Products.