Manufacturing index continues solid pace in May

The manufacturing industry recorded growth for a full year, with the Institute for Supply Manufacturing’s (ISM) purchasing manufacturers index (PMI) recording 61.2%, which is a half-point higher than April. It is the fourth straight month the index has been over 60 and is the fifth time in six months. This has, overall, been a healthy rebound for the industry as a whole after recording a contraction in April 2020 during the height of the COVID-19 pandemic. Now, with vaccinations reaching more than half of the United States and demand reaching new highs, there is great reason for optimism, but also concern for some potential headwinds. While demand is high, the inability to have enough personnel due to the lack of skilled labor and health concerns could cause some problems down the road.

Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a press release: “The manufacturing economy continued expansion in May. Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long 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 part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”

The six biggest manufacturing industries recorded strong to moderate growth in May and all but one of the 18 manufacturing industries reported growth.

“Manufacturing performed well for the 12th straight month, with demand, consumption and inputs registering strong growth compared to April. Panelists companies and their supply chains continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor. Record backlog, customer inventories and raw material lead times are being reported. The manufacturing recovery has transitioned from first addressing demand headwinds, to now overcoming labor obstacles across the entire value chain,” Fiore said.

What respondents are saying

• “Supplier performance — deliveries, quality, it’s all suffering. Demand is high, and we are struggling to find employees to help us keep up.” [Computer and electronic products]
• “Changes in currency exchange rates favorably contributed to our quarterly performance. Continued strong consumer demand for our high-quality products also provided increased sales.” [Chemical products]
• “Ongoing component shortages are driving dual sourcing and longer-term supply plans to be implemented.” [Transportation equipment]
• “Difficulty finding workers at the factory and warehouse level is not only impacting our production, but suppliers’ as well: Spot shortages and delays are common due to an inability to staff lines. Delays at the port continue to strain inventory levels.” [Food, beverage and tobacco products]
• “[A] lack of qualified candidates to fill both open office and shop positions is having a negative impact on production throughput. Challenges mounting for meeting delivery dates to customers due to material and services shortages and protracted lead times. This situation does not look to improve until possibly the fourth quarter of 2021 or beyond.” [Fabricated metal products]
• “Labor shortages impacting internal and supplier production. Logistics performance is terrible.” [Electrical equipment, appliances and components]
• “Business is good, but labor and raw materials are becoming very problematic, driving increases in costs.” [Furniture and related products]
• “The continued global supply chain tightness and raw material shortages from the Gulf (winter storms) make it less likely that any business can recover this year. Demand is strong, but what good is that if you cannot get the materials needed to produce your finished goods?” [Nonmetallic mineral products]
• “Seeing a high demand and backlog of orders.” [Plastics and rubber products]
• “Very busy, but still experiencing labor shortages.” [Primary metals]

Original content can be found at Plant Engineering.

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