Economic activity in the U.S. manufacturing sector grew in October, the nation’s supply executives said in the latest Manufacturing ISM “Report On Business.”
“The October Manufacturing PMI registered 60.8 percent, a decrease of 0.3 percentage point from the September reading of 61.1 percent,” Timothy R. Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, said. “This figure indicates expansion in the overall economy for the 17th month in a row after a contraction in April 2020. Business Survey Committee panelists reported that their companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand. 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.”
ISM noted that a Manufacturing PMI above 43.1 percent, over a period of time, generally indicates an expansion of the overall economy.
The 16 manufacturing industries reporting growth in October were led by apparel, leather and allied products, furniture and related products and textile mills.
“The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for October corresponds to a 5 percent increase in real gross domestic product (GDP) on an annualized basis,” Fiore said.
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, he noted.
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“However, panel sentiment remains strongly optimistic, with four positive growth comments for every cautious comment,” Fiore said. “Panelists are fully focused on supply chain issues in order to respond to the ongoing high levels of demand.”
ISM’s New Orders Index registered 59.8 percent in October, a decrease of 6.9 percent compared to September. A New Orders Index above 52.8 percent is generally consistent with an increase in the Census Bureau’s series on manufacturing orders.
Apparel, leather and allied products topped the 14 of 18 manufacturing industries reporting growth in new orders in October, which also included furniture and related products and textile mills.
The Production Index registered 59.3 percent in October, 0.1 percent lower than the September reading. An index above 52.1 percent is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
ISM’s Employment Index registered 52 percent in October, 1.8 percent points above the September reading. An Employment Index above 50.6 percent is consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Of 18 manufacturing industries, the 11 industries reporting employment growth in October were led by apparel, leather and allied products and textile mills, and included furniture and related products.
The Supplier Deliveries Index registered 75.6 percent for the month, 2.2 percent points higher than the 73.4 percent reported in September. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
“Deliveries slowed at a faster rate compared to the previous month,” Fiore said. “The peak has not been seen yet.”
All 18 industries reported slower supplier deliveries in October, topped by apparel, leather and allied products, and furniture and related products.
The Inventories Index registered 57 percent in October, 1.4 percent higher than September. An Inventories Index greater than 44.5 percent is consistent with expansion in the Bureau of Economic Analysis figures on overall manufacturing inventories.
The ISM Prices Index registered 85.7 percent, an increase of 4.5 percent compared to September, indicating raw materials prices increased for the 17th consecutive month. This is the 14th month in a row that the index has been above 60 percent and the 11th straight month it has exceeded 70 percent. A Prices Index above 52.7 percent is consistent with an increase in the BLS Producer Price Index.
In October, all 18 industries reported paying increased prices for raw materials, led by apparel, leather and allied products and including textile mills, and furniture and related products.
ISM’s Backlog of Orders Index registered 63.6 percent in October, a 1.2-percent decrease from September, indicating order backlogs expanded for the 16th straight month.
“Backlogs expanded at a lower rate in October compared to September, indicating production was able to keep up with continuing strong new order levels,” Fiore said. “However, backlogs remain at historically high levels.”
ISM’s Imports Index registered 49.1 percent in October, a decrease of 5.8 percent from September.
“Imports contracted in October after 15 consecutive months of expansion, reflecting continuing challenges with throughput at U.S. ports of entry,” Fiore added. “Overland-transport challenges and container shortages continue to persist across the global supply chain, causing instability with import level projections. Imports will continue to be challenged through the end of 2021 and likely through the first half of 2022.”
The five industries reporting growth in imports in October were led by textile mills and included furniture and related products.