Manufacturing Continues Growth

Economic activity in the manufacturing sector grew in June, with the overall economy notching a 13th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

“The June Manufacturing PMI registered 60.6 percent, a decrease of 0.6 percentage point from the May reading of 61.2 percent. This figure indicates expansion in the overall economy for the 13th month in a row after contraction in April 2020. The New Orders Index registered 66 percent, decreasing 1 percentage point from the May reading of 67 percent. The Production Index registered 60.8 percent, an increase of 2.3 percentage points compared to the May reading of 58.5 percent.

Economic activity in the manufacturing sector grew in June, with the overall economy notching a 13th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

“The Prices Index registered 92.1 percent, up 4.1 percentage points compared to the May figure of 88 percent and the index’s highest reading since July 1979 (93.1 percent). The Backlog of Orders Index registered 64.5 percent, 6.1 percentage points lower than the May reading of 70.6 percent. The Employment Index registered 49.9 percent; 1 percentage point lower compared to the May reading of 50.9 percent. The Supplier Deliveries Index registered 75.1 percent, down 3.7 percentage points from the May figure of 78.8 percent.

“The Inventories Index registered 51.1 percent, 0.3 percentage point higher than the May reading of 50.8 percent. The New Export Orders Index registered 56.2 percent, an increase of 0.8 percentage point compared to the May reading of 55.4 percent. The Imports Index registered 61 percent, a 7-percentage point increase from the May reading of 54 percent.”

Fiore continues, “Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long raw-material 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 parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.

“Optimistic panel sentiment remained strong, with 16 positive comments for every cautious comment. Demand expanded, with the (1) New Orders Index growing, supported by the New Export Orders Index continuing to expand, (2) Customers’ Inventories Index continuing at very low levels and (3) Backlog of Orders Index continuing at a very high level. Consumption (measured by the Production and Employment indexes) improved in the period, posting a combined 1.3-percentage point increase to the Manufacturing PMI calculation.

“The Employment Index, which held back further expansion, contracted after six straight months of expansion, as panelists continued to note significant difficulties in attracting and retaining labor at their companies’ and suppliers’ facilities. Inputs — expressed as supplier deliveries, inventories, and imports — continued to support input-driven constraints to production expansion, at higher rates compared to May, due to continued trouble in supplier deliveries. The Prices Index expanded for the 13th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.

“All of the six biggest manufacturing industries — Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Petroleum & Coal Products, in that order — registered moderate to strong growth in June.

“Manufacturing performed well for the 13th straight month, with demand, consumption and inputs registering growth compared to May. Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor. Continued high backlog levels, too low customers’ inventories and record raw-materials lead times are being reported. Labor challenges across the entire value chain continue to be the major obstacles to increasing growth,” says Fiore.

Seventeen of 18 manufacturing industries reported growth in June, in the following order: Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Plastics & Rubber Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Textile Mills; Primary Metals; Food, Beverage & Tobacco Products; Paper Products; Printing & Related Support Activities; Wood Products; and Petroleum & Coal Products. No industry reported a decrease in June.