Economic activity in the manufacturing sector grew in July, with the overall economy notching a 14th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
The report was issued last week by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“The July Manufacturing PMI® registered 59.5 percent, a decrease of 1.1 percentage points from the June reading of 60.6 percent. This figure indicates expansion in the overall economy for the 14th month in a row after contraction in April 2020. The New Orders Index registered 64.9 percent, decreasing 1.1 percentage points from the June reading of 66 percent.
The Production Index registered 58.4 percent, a decrease of 2.4 percentage points compared to the June reading of 60.8 percent. The Prices Index registered 85.7 percent, down 6.4 percentage points compared to the June figure of 92.1 percent, which was the index’s highest reading since July 1979 (93.1 percent). The Backlog of Orders Index registered 65 percent, 0.5 percentage point higher than the June reading of 64.5 percent. The Employment Index registered 52.9 percent, 3 percentage points higher compared to the June reading of 49.9 percent. The Supplier Deliveries Index registered 72.5 percent, down 2.6 percentage points from the June figure of 75.1 percent. The Inventories Index registered 48.9 percent, 2.2 percentage points lower than the June reading of 51.1 percent. The New Export Orders Index registered 55.7 percent, a decrease of 0.5 percentage point compared to the June reading of 56.2 percent. The Imports Index registered 53.7 percent, a 7.3-percentage point decrease from the June reading of 61 percent.
“Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels. As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products. Worker absenteeism, short-term shutdowns due to parts shortages and difficulties in filling open positions continue to be issues limiting manufacturing-growth potential.
“Optimistic panel sentiment remained strong, with 13 positive comments for every cautious comment. Demand expanded, with the (1) New Orders Index growing, supported by continued expansion of the New Export Orders Index, (2) Customers’ Inventories Index remaining at very low levels and (3) Backlog of Orders Index staying at a very high level. Consumption (measured by the Production and Employment indexes) improved in the period, posting a combined 0.6-percentage point increase to the Manufacturing PMI calculation.
“The Employment Index returned to expansion after one month of contraction; panelists continued to note significant difficulties in attracting and retaining labor at their companies’ and suppliers’ facilities, although there were signs of improvement. Inputs — expressed as supplier deliveries, inventories, and imports — continued to support input-driven constraints to production expansion, at slower rates compared to June as the Supplier Deliveries Index softened while the Inventories Index contracted, likely due to long lead times. The Prices Index expanded for the 14th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.
“All of the six biggest manufacturing industries — Computer & Electronic Products; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Petroleum & Coal Products, in that order — registered moderate to strong growth in July.
“Manufacturing performed well for the 14th straight month, with demand, consumption and inputs registering growth compared to June. Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to difficulties in hiring and retaining direct labor. Comments indicate slight improvements in labor and supplier deliveries offset by continued problems in the transportation sector. High backlog levels, too low customers’ inventories and near record raw-materials lead times continue to be reported. Labor challenges across the entire value chain and transportation inefficiencies are the major obstacles to increasing growth,” said Fiore.
Seventeen of 18 manufacturing industries reported growth in July, among them Printing & Related Support Activities; Miscellaneous Manufacturing; Computer & Electronic Products; Machinery; Fabricated Metal Products; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, and Appliances & Components.