Business of Engineering

Manufacturing index stays strong in November

The purchasing manufacturers' index (PMI) drops from the 2-year high in October to 57.5%, but still records its seventh straight month of growth.

By Chris Vavra December 2, 2020
Courtesy: CFE Media and Technology

Manufacturing grew in November, with the overall economy notching a seventh consecutive month of growth. The Institute for Supply Management’s (ISM) purchasing manufacturers’ index (PMI) registered 57.5%, which is down 1.8 percentage points from the October reading of 59.3%. New orders and production dropped from October, but stayed above 60%. However, employment returned to contraction territory, with a reading of 48.4%, which is almost 5% down from its reading in October.

“Among the six biggest manufacturing industries, five (Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products) registered solid growth in November. Sixteen of the 18 manufacturing industries reported overall growth.

“Manufacturing performed well for the sixth straight month, with demand, consumption and inputs registering growth, but at slower rates compared to October,” said chairman Timothy Fiore in a press release. “Labor market difficulties, both current and anticipated, at panelists’ companies and their suppliers will continue to dampen the manufacturing economy until the coronavirus (COVID-19) crisis ends.”

What respondents are saying

  • “Suppliers are still experiencing labor shortages resulting in component constraints. However, we’re seeing life from customers, so there’s a positive outlook moving into the first quarter of 2021.” (Computer & electronic products)
  • “Production issues for petrochemicals are getting resolved after a very active hurricane season. That is helping balance supply and demand.” (Chemical products)
  • “The resurgence in COVID-19 cases is adding strain on our Tier-1 and Tier-2 suppliers. Multiple suppliers mentioned that finding new people is an issue with the COVID-19 situation. And there is a learning curve for new [supplier] hires, impacting production efficiency at their place.” (Transportation equipment)
  • “We are getting a lot more COVID-19 hits in our factories. We are also sending employees home for 14 days to quarantine if they were in close proximity to individuals that tested positive. We have had to shut down production lines due to lack of staffing. Cost of goods sold [COGS] is much higher than normal due to labor and production inefficiencies.” (Food, beverage & tobacco products)
  • “Jet fuel being down in consumption really hurts the refining market.” (Petroleum & coal products)
  • “We will finish out the fourth quarter very strong. Customers have increased demand and 2021 is expected to continue to grow.” (Fabricated Metal Products)
  • “Sales have been steady, but down 30 percent year over year. Work hours for production are going up, but still have several on lay-off. Starting to see some inflationary pressure on materials.” (Furniture & related products)
  • “Business continues to be strong, with significant back-orders. Suppliers have struggled to hire people, as we have to support the increased business. We are seeing significant delays in getting parts and material from China through U.S. ports, especially [at the Port of] Long Beach. Material costs continue to hold steady. The national election and continued COVID-19 uncertainty are concerns.” (Machinery)
  • “Customer order volumes are very strong, but our suppliers are having issues meeting our orders due to people shortages.” (Plastics & rubber products)
  • “Our business is booming, as many customers need products ASAP. A great situation.” (Primary metals)

Chris Vavra
Author Bio: Chris Vavra is the web content manager for CFE Media.