The manufacturing economy grew in April and the overall economy showed an 11th consecutive month of growth, according to the Institute for Supply Management’s monthly Manufacturing ISM Report on Business.
The April PMI of 60.7% was four percentage points lower than the March reading of 64.7% but well above the 50% level that indicates a generally expanding economy. A PMI below 50% indicates a generally declining economy.
“All of the six biggest manufacturing industries — fabricated metal products; chemical products; food, beverage & tobacco products; computer & electronic products; transportation equipment; and petroleum & coal products, in that order — registered moderate to strong growth in April,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, in a news release.
Among the individual indices that comprise the PMI, the New Orders Index, Production Index and Employment Index all showed growth, although at a slower rate than in the previous month. The Backlog of Orders Index and New Export Orders also showed growth, but at an increasing rate. Supplier deliveries slowed and the Inventories Index moved into contraction mode at 46.5%. Customers’ inventories were also registered as “too low,” in the ISM Report on Business.
While the report projected strong economic activity among manufacturers, survey members expressed a number of concerns.
"Survey committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials,” Fiore said. “Recent 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."
Nevertheless, optimism among the panel increased compared with the previous month.
What They Are Saying
The Manufacturing ISM Report on Business also shares comments from their survey respondents. Among those collected in this latest survey:
- “Continued strong sales; however, we have had to trim some production due to the global chip shortage. Hasn’t affected inventories greatly yet, but a continued decrease will begin to reduce available inventories if we don’t recover chip supply shortly.” (Transportation Equipment)
- “In 35 years of purchasing, I’ve never seen everything like these extended lead times and rising prices — from colors, film, corrugate to resins, they’re all up. The only thing plentiful at present, according to my spam filter, is personal protective equipment [PPE].” (Plastics & Rubber Products)
- “Steel prices are crazy high. The normal checks on the domestic steel mills are not functioning — imported steel is distorted by the Section 232 tariffs.” (Fabricated Metal Products)
