Manufacturing output, for the month of November was up slightly over October, remaining on a strong growth path, according to data issued today by the Institute for Supply Management (ISM).
In its monthly Manufacturing Report on Business, ISM said that the report’s key metric, the PMI, was 61.1 (a reading of 50 or higher indicates growth), up 0.3% compared to October’s 60.8 reading. This represented the 18th consecutive month of growth, at a faster rate, coupled with November also representing the 18th consecutive month of growth for the overall economy.
The September PMI is 0.3% above the PMI’s 12-month average, at 60.8, with March’s 64.7 being the high point and January’s 58.7 being the low point.
ISM reported that 13 manufacturing sectors saw gains in November, including: Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. The two industries showing decreases were Printing & Related Support Activities; and Primary Metals. Non-metallics, textiles, and wood products were flat for the month.
ISM also pointed out that the six biggest manufacturing sectors— Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment, in that order —saw moderate to strong growth.
The report’s key metrics saw varying gains in November.
New orders, which are commonly referred to as the engine that drives manufacturing, increased 1.7%, to 61.5, growing, at a faster rate, for the 18th consecutive month, with three of the largest manufacturing sectors—Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical products—expanding at strong-to-moderate levels. This also marked the 16th time in the last 17 months, in which the reading topped a reading of 60.
Production—at 61.5—headed up 2.2% over October, growing, at a faster rate, for the 18th consecutive month, with four of the largest manufacturing sectors—Petroleum & Coal Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products— expanding at strong-to-moderate levels. ISM said that raw materials shortages remain a constraint to production growth, with suppliers continuing to struggle, coupled with factory floor staffing still an issue and direct-labor turnover remaining negative.
Employment—at 53.3—saw a 1.3% gain over October, growing, at a faster rate, for the third consecutive month. ISM said that Computer & Electronic Products, Chemical Products, and Fabricated Metal Products expanded, with ISM noting that companies are still struggling to meet labor-management plans.
Other notable metrics included:
Supplier deliveries—at 72.2 (a reading above 50 indicates contraction)—slowed, at a slower rate, for the 69th consecutive month, following October’s 75.6, with the delivery performance of suppliers to manufacturing organizations again slower in November;
Backlog of orders—at 61.9—was down 1.7% compared to October and growing, at a slower rate, for the 17th consecutive month;
Inventories—at 56.8—were down 0.2%, growing, at a slower rate, for the fourth straight month, and customer inventories—at 25.1—up were down 6.6, trending too low, at a faster rate, for the 62nd consecutive month; and
Prices are down 3.3%, to 82.4, increasing, at a slower rate, for the 18th consecutive month
Comments from ISM member respondents in the report reflected many of the ongoing manufacturing challenges that have been seen over the last several months, including supply chain issues, labor retention challenges, and rising costs, among others.
“We are experiencing significant supply chain disruptions, which are resulting in historically long lead times to get product to our customers,” said a Miscellaneous Manufacturing respondent. “Commodity-based inflationary pressures are widespread, and traditional means of addressing these pressures are not effective due to unprecedented demand.”
And a Furniture & Related Products respondent observed that business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor.
Tim Fiore, Chair of the ISM’s Manufacturing Business Survey Committee said in an interview that November represented what he called a “really high-quality month,” with the PMI in line with October, with the caveat that there was a shift between consumption [measured by the Production and Employment indexes] and inputs [expressed as supplier deliveries, inventories, and imports], which was very positive and supported by the fact that there was a little bit of easing on the prices side, with demand remaining very robust. We sped up again, in terms of new order intake. Backlog is still above 60, and customer inventories are almost tied for a record-low.”
“We saw an easing in supplier deliveries by 3.4%, and we saw manufacturing inventories come off 0.2%,” he said. “That was offset by production and employment growing. These are not really bold movements but movements that are in the right direction, with the goal of equilibrium.”
Addressing the slight easing in November prices, Fiore highlighted how 68% of ISM panelists cited rising prices, for the month, down from 72% in October. He said this supports the fact that there is some easing that is not dramatic.
“We are still living kind of with the wave of it all,” he said. “I am not forecasting any kind of big drop in December and January. A 3% drop every month through the first quarter would be pretty good, I think. The supplier deliveries number is running pretty much in lock step with the prices index, so as suppliers are easing a little bit, the prices index is easing a little bit, too. The reverse occurred in October, and in August and September, there was easing in prices and in supplier deliveries, nothing dramatic but easing nonetheless. In October, we had a reversal of that once again, and in November a reversal of that. I am hoping those numbers continue to come down a little bit, because the goal is to get the employment number up to 60 and production up to 63-64.”
Looking at employment, Fiore explained that in November 7% of respondents stated that conditions were improving compared to October, with that reading at 5% in October, September at 3%, and August at 0%. That is a trend that is signaling it appears to be a little bit easier to bring people in, while it is still difficult over all.
When asked to assign a grade for the manufacturing sector over on a year-to-date basis, Fiore gave it a “B.”
“It is not an ‘A,’ as there have been these intermittent kinds of disruptions that have held things back,” he said. “There is concern about transportation equipment being the weakest of the top six manufacturing sectors, and there has been for quite some time. It is dragging us down, and that includes cars, trucks, and airplanes. In a normal environment, you would see transportation equipment performing much better. If we could get trucks and cars, it would be ‘A’ or ‘A-.’ That trickles down to other sectors like fabricated metal products and computers & electronics.”
SC
MR
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