Economy
ISM Reports 13th Consecutive Month of Manufacturing Growth
Written by Brett Linton
July 1, 2021
New orders and production picked up in June, while employment contracted, supplier deliveries slowed and backlogs lengthened, said the Institute for Supply Management in its June 2021 Manufacturing ISM Report on Business. The Manufacturing PMI fell a slight 0.6 percentage point to 60.6 after rising in May and indicates expansion for the overall economy.
“Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing growth potential,” said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee.
New orders declined 1 point to 66% in June, while the production index rose over 2 points to 60.8%. The order backlog index decreased 6.1 points to 64.5%.
“All of the six biggest manufacturing industries — Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Petroleum & Coal Products, in that order — registered moderate to strong growth in June,” said Fiore.
Comments from panel respondents included:
- “Continue to see very strong demand across all business units. In many cases, we are limited in our ability to supply by raw-materials availability. Still running at record volume, but could be producing much more. Even if we were able to get all the raw materials needed, we would have capacity issues on many of our production units. Manpower has been a concern.” [Chemical Products]
- “Strong sales continue, and production output is at 100 percent. COVID-19 restrictions have been mostly lifted. Global chip allocation continues to limit some feature offerings — production schedules have been updated to restrict content affected by the chip shortage.” [Transportation Equipment]
- “No major concerns or activity to report this month. Oil prices have continued to steadily rise, which gives our executive-level management confidence that our capital budgets are set to the correct amounts, and we can proceed with already planned projects without fear that they’ll need to be deferred or canceled due to dynamic oil markets.” [Petroleum & Coal Products]
- “Demand continues to be strong, and customer-ordering patterns are shifting to include long-term demand. Customers are now placing orders for fourth quarter 2021 and first quarter 2022 due to global supply chain issues.” [Fabricated Metal Products]
- “Other than material availability/volatility and rising prices, the outlook for our company is good. We can’t keep up with the increase in orders and have projects that may require a second shift to be added temporarily, but that might not be possible if material availability — for example, lumber products — remains an issue for us.” [Furniture & Related Products]
- “Customer demand remains strong. Supply chain issues continue to hamper materials availability and impact production scheduling. Supplier costs continue to rise due to increasing materials, labor and shipping costs.” [Machinery]
- “Higher prices, inflation and lack of available labor are impacting all organizations in our supply chain.” [Electrical Equipment, Appliances & Components]
- “Supply disruptions continue, with no end in sight!” [Nonmetallic Mineral Products]
- “We continue to be oversold, based on what we are currently capable of producing. Lack of labor is killing us.” [Primary Metals]
An expanded analysis is available here on the ISM website.
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Brett Linton
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