According to the ISM, U.S. industry is still bedeviled by supply inconsistencies despite growing production and demand.
Data from the Institute for Supply Management show that the manufacturing sector grew in February at a faster rate than it had in January. The ISM’s Purchasing Manager’s Index hit 60.8, 2.1 points higher than January’s 58.7. A figure above 50 in the index indicates growth.
The latest numbers show February as the latest month in a nine-month growth streak in manufacturing after a precipitous contraction in the summer of 2020, mainly due to the COVID-19 pandemic and efforts to contain it.
The ISM’s measures for new orders, production, employment, prices, order backlogs, and new export orders all increased at a faster rate last month than they had in January. New imports also continued to increase, but at a slower rate than previously. Most measures of growth, like the main PMI, have been increasing for nine or eight months. Employment has only been in growth territory for three months.
The only outliers for growth were supplier deliveries, which have been getting slower and slower now for 60 months straight, and inventories, which moved into contraction territory in February after growth in January.
Timothy Fiore, CEO of the ISM, noted that, although general sentiment among surveyed manufacturing executives increased and the employment index continued to improve, several participants noted difficulties hiring and other issues. “Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories,” said Fiore; “Issues with absenteeism, short-term shutdowns to sanitize facilities, and difficulties in hiring workers remain challenges and continue to cause strains that limit manufacturing-growth potential.”
Comments from executives indicated that despite growth with demand, manufacturers in several industries are struggling to keep up thanks to snarled supply chains. “We have experienced a higher rate of delinquent shipments from our ingredient suppliers in the last month,” said an executive in the foods and beverages sector, who anticipated a coming surge in the months ahead as more restaurants reopen.
“Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages,” said an executive of an electrical equipment and appliances business. One representative from the electronic products industry and another in plastics and rubber specifically said their suppliers were running thin on employees: “Labor shortages at suppliers are affecting material deliveries and prices,” said the plastics and rubber executive.
One executive at a chemical products company noted their own novel difficulty: Extreme weather. “Supply chains are depleted; inventories up and down the supply chain are empty,” they said, and added that the recent “deep freeze” on the Gulf coast is expected to extend those shortages.
“Supply chain disruptions are certainly still impacting manufacturers—either from the storms in the South, shutdowns and slowdowns because of COVID absenteeism, or backlogs of key components that haven’t recovered yet from shutdowns earlier this year,” said Ethan Karp, CEO of MAGNET, a not-for-profit manufacturing consultancy group. In an email to IndustryWeek, Karp said manufacturers should expect growth to continue as vaccination continues and “pent-up demand” from 2020 continues to play out.