Manufacturing sector growth slips in September
by October 3, 2022 10:10 am 563 views
Manufacturing growth softened in September as the Purchasing Managers’ Index (PMI) fell by 1.9 percentage points to 50.9%, according to the Institute for Supply Management (ISM). The September index was the lowest since May 2020, when it was 43.5%.
The ISM released Monday (Oct. 3) the September Manufacturing ISM Report on Business that shows the PMI has moderated from a 12-month high of 60.8% in October 2021. Manufacturing growth was flat at 52.8% in August, from July. A reading above 50% indicates the manufacturing sector is growing.
According to the ISM’s September report, new orders and employment tightened, production and backlogs rose and supplier deliveries slowed at a slower rate. Raw materials inventories increased, while customer inventories were too low. Prices increased at a slower rate, exports contracted and imports rose.
“The U.S. manufacturing sector continues to expand, but at the lowest rate since the pandemic recovery began,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “Following four straight months of panelists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand.”
He said that panelists’ companies are managing employment levels through hiring freezes and attrition to lower levels amid uncertainty in medium- and long-term demand.
The following manufacturing industries reported moderate-to-strong growth in September: machinery; transportation equipment; food, beverage and tobacco products; and computer and electronic products.
“Manufacturing expanded for the 28th straight month,” Fiore said. “Panelists’ companies slowed hiring activity; month-over-month supplier delivery performance was the best since December 2019; prices growth slowed notably with the index at 60% or lower for the third consecutive month; and lead times continue to ease for capital equipment and production materials. Markedly absent from panelists’ comments was any large-scale mentioning of layoffs; this indicates companies are confident of near-term demand, so primary goals are managing medium-term head counts and supply chain inventories.”
Multiple respondents reported supply chain issues continued in September, while some struggled with sourcing electronic materials.
In the computer and electronic products industry, a respondent said, “supply chain issues for all electronic components and custom build-to-print materials are in short supply due to capacity and skilled labor shortages. Energy cost continues to negatively impact freight cost.”
In the electrical equipment, appliances and components industry, a respondent said, “business continues to be strong. Some commodities within the supply chain are starting to stabilize, while others are still causing disruption for production. Electrical and wiring components continue to cause significant issues. (We) cannot run consistently as we would like.”
A respondent in miscellaneous manufacturing noted that orders remain strong; “however, we are not able to accept any new orders for shipment for the rest of 2022 due to motor and electronic component shortages.”
Other respondents noted labor challenges and a decline in customer orders.
A respondent in the fabricated metal products industry said, “business is flat to down due to inflation and interest rates. Hard to find and keep employees due to wage increases by competitors.”
A respondent in the chemical products industry said, “concerns of global economic slowdown are growing, and (we are) experiencing some customers pulling back orders.”
A respondent in the food, beverage and tobacco products industry said, “almost all suppliers are experiencing lead times growth. It seems no one wants to keep inventory on hand anymore.”