New Orders, Production and Employment Grow as Supplier Deliveries Slow Further

The November Purchasing Managers Index (PMI®) registered 61.1%, up 0.3 percentage points from October. Economic activity in the manufacturing sector grew for 18-consecutive months, according to the November Manufacturing Institute for Supply Management® (ISM®) Report On Business®. The report is based on survey responses from U.S. supply executives to the November PMI®.

"The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement," said Timothy Fiore, CPM, chair of the ISM® Manufacturing Business Survey Committee. "All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products."

Demand and consumption grew during the period. The Employment Index, which expanded for a third month, indicates the ability to hire is improving, partially offset by the challenges of turnover and backfilling. Inputs—expressed as supplier deliveries, inventories and imports—continued to constrain production, but there are early signs of supplier performance improving, the report notes. The Supplier Deliveries Index continued to slow, but at a slower rate, while the Inventories Index expanded more slowly. In November, the Prices Index expanded for the 18th-consecutive month, at a slower rate, indicating continued supplier pricing power and scarcity of supply chain goods.

"Coronavirus pandemic-related global 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 said in the report. "However, panel sentiment remains strongly optimistic, with 10 positive growth comments for every cautious comment. Panelists remain optimistic that manufacturing growth potential can be achieved as focus surrounds improving supply-chain issues and responding to ongoing high levels of demand."

The six biggest manufacturing industries—computer and electronic products; food, beverage and tobacco products; chemical products; petroleum and coal products; fabricated metal products; and transportation equipment, in that order—registered moderate to strong growth in November, Fiore said. "Panelists' comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover. Indications that supplier delivery rates are improving were supported by the supplier deliveries index softening. Transportation networks, a harbinger of future supplier delivery performance, are still performing erratically."

Comments from survey respondents include:

  • "International component shortages continue to cause delays in completing customer orders. Backlog continues to increase." [Computer & Electronic Products]
  • "Petrochemical supply chain is slowly showing signs of improvement after multiple weather disruptions in 2021." [Chemical Products]
  • "Large volume drops due to chip shortage." [Transportation Equipment]
  • "Oil is up, but our capital spending remains flat for now. No new orders at this time." [Petroleum & Coal Products]
  • "While steel plate and hot-rolled coil pricing seems to be approaching a plateau, the biggest challenge we have at the moment is finding qualified workers." [Fabricated Metal Products]
  • "Business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor." [Furniture & Related Products]
  • "In the first nine months of the year, business conditions were off the charts, and sales by far outpaced capacity. This has put backlog at record levels and, surprisingly, customers have been willing to wait, albeit reluctantly. However, there seems to be a flattening: Sales remain strong but are not growing at the same month-over-month pace from the previous six to nine months." [Machinery]

-Bryan Mason, editorial associate

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