“Business is getting stronger, but the supply chain is getting worse every day.”
The U.S. manufacturing sector continued to expand in October, reaching its seventeenth straight month of expansion, according to the Institute of Supply Management’s survey of supply executives released November 1st.
The ISM reports its index of manufacturing activity eased back 0.3% in October to a reading of 60.8% as a raft of challenges continued to impact the sector.
In October, new orders and production continued to grow -- though at a slower rate compared to previous months. Meanwhile, a lag in supplier deliveries worsened, while prices rose. Imports, which typically tend to grow, contracted in October as companies faced severe challenges in obtaining parts overseas. Exports, however, grew as did the ISM’s employment index, up 1.8% to an expansionary reading of 52.
Meanwhile, prices rose at a faster rate compared to September, advancing 4.5% to a reading of 85.7%. The ISM listed a wide range of materials that have gone up in price, including steel, aluminum, resins, PCBs, corrugate packaging and supplies, PVC, propylene and more. The only commodity down in price was wood.
Timothy Fiore, Chair of the ISM committee said that survey panelists reported their companies and suppliers continue to face an “unprecedented number of hurtles to meet increasing demand.” Fiore referred to multiple challenges, stating that “All segments of the manufacturing economy are impacted by continued shortages of critical materials, record-long raw materials lead times, rising commodities prices and difficulties transporting products.”
Fiore also referred to ongoing coronavirus-related challenges such as worker absenteeism, difficulty finding workers, short-term shutdowns due to parts shortages, and supply chain challenges overseas. Meanwhile Fiore stated ports congestion in China and U.S., the world’s largest trading partners “continue to be a headwind, as transportation networks remain stressed.”
Optimism among manufacturing executives was strong and even improved slightly over September. The ISM registered 4 positive comments for every one negative, compared to last month’s 3 positive comments for every one negative comment.
In October, sixteen of eighteen industries reported growth, strongest in apparel, leather & allied products; furniture & related products; textile mills; electrical equipment, appliances & components; and machinery.
What Manufacturers Are Saying About Business Conditions
Among the most astute comments from manufacturing executives was this from an executive chemical products industry: “Business is getting stronger, but the supply chain is getting worse every day”
This sentiment played out across many comments from executives. “Demand for our products remains strong, but we continue to struggle to secure enough raw material to keep our manufacturing lines running,” said one executive in the miscellaneous manufacturing sector.
Others point to difficulty obtaining parts from overseas. “Getting anything from China is near impossible — extreme delays. Microchip and circuit breaker shortages continue and are expected to continue into 2022,” said an executive in the computer & electronic products sector.
One respondent in the fabricated metals sector pointed to increased domestic capital spending, perhaps in response to the supply chain chaos overseas. “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.”
And is there any supply chain relief in sight? One executive sees the current situation sticking around for the near future: “My prediction is that 2022 will be very similar to 2021 — similar demand, constrained supply, restricted logistics and rampant inflation.”
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