After months of supply chain constraints and historic demand, the U.S. manufacturing climate is shifting once again. Get the latest data on manufacturing capacity utilization, prices, optimism, and regional performance in our key takeaways from September’s most critical manufacturing business reports.
Executive Summary
• The PPI for final demand goods rose 0.4% in September, following two months of losses, while year-over-year data finds PPI for final demand goods has risen 8.5% since September 2021.
• New benchmark data released on container rates find global shipping costs have plummeted over the past several months, suggesting an ease to the shipping snarls that have plagued the sector since the pandemic.
• The number of unfilled manufacturing jobs remained elevated at 801,000, while hiring held steady.
• Manufacturing output rose a half percent, while manufacturing capacity utilization is 1.8% above its long-run average.
• Regional manufacturing surveys show slowing activity for most areas of the country, with the exception of Texas.
• The U.S. automotive sector has seen a nearly 20% increase in output compared to this time last year.
Manufacturing Output Rises in September
U.S. manufacturing production rose a half percent in September, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released October 18th. Meanwhile, the index for mining rose 0.6%, while the utilities index fell 0.3%.
Manufacturing capacity utilization rose one third of a percent in September and now stands at 80% -- 1.8% higher than its long-run average.
Manufacturing sectors that saw the sharpest increase in capacity utilization in September included nonmetallic mineral products, motor vehicle and parts, aerospace, and petroleum and coal products. Sectors decreasing capacity included printing & related support activities and paper products.
September’s output losses were strongest in printing & support-related activities, which declined 1.6% and miscellaneous non-durable goods, which dropped 1.3%.
Year-over-year, motor vehicles and parts saw the largest increase in output, up 19.4%, followed by nonmetallic mineral products, up 8%.
Hiring in Manufacturing Accelerates, Unfilled Positions Decline
U.S. manufacturers added 22,000 jobs in September, according to the latest from the Bureau of Labor Statistics.
Read more: Hiring Trends in U.S. Manufacturing
Meanwhile, the U.S. economy as a whole added 268,000 positions, down from the 315,000 jobs the U.S. added in August.
In September, employment gains were strongest in transportation equipment (+8,400 jobs), food processing (+7,800); and fabricated metals (+6,300).
Gains were offset by losses in printing/related support activities (-4,300), as well as computer and electronic products (-1,700 jobs) and nonmetallic mineral products (-1,500).
Meanwhile, according to the latest JOLTS (Job Openings and Labor Turnover Survey) reported September 12th, the number of unfilled job openings in the sector fell to 801,000 in August from 943,000 in July.
Global Container Rates Fall
In September, the Drewey Composite World Container Index, a benchmark for shipping container prices, found that shipping costs have dropped considerably, with prices down 66% over last September, continuing a downward trend seen for 33 consecutive weeks. Prices hit an all-time high during the pandemic and are still elevated above the pre-pandemic mark.
In a reversal of what we saw during the pandemic in which shipping containers were either in short supply or congesting ports, now demand for them has fallen, and rates along with it. This suggests that some of the global supply chain issues surrounding shipping issues are continuing to ease, but also suggests global demand is waning.
Manufacturing Activity Expanded at Slowest Rate in 2.5 Years
Meanwhile, U.S. manufacturing grew at its slowest pace in two-and-a-half years in September, hitting a near-contractionary reading of 50.9%, according to the latest report from the Institute for Supply Management.
Demand slowed significantly in September, with new orders falling into contraction, while employment also contracted sharply. Manufacturers continued to see relief from high prices, with the ISM’s prices index declining to its lowest level since June 2020.
Nine of eighteen industries surveyed by the ISM reported growth in September, led by nonmetallic mineral products; plastics and rubber products; and miscellaneous manufacturing.
Comments from manufacturers revealed emerging concerns over a global economic slowdown, while supply chain constraints and labor shortages continue to plague the industrial sector.
Regional Surveys
Empire State Manufacturing Survey Manufacturing activity in the New York region declined in October, falling 8 points to a contractionary reading of -9.1%, according to the latest Empire State Manufacturing Survey, released at the beginning of October.
The report found that while new orders and delivery times held steady, the shipments index plunged 20 points to a reading of -0.3% and unfilled orders contracted to -3.7%.
23% of executives surveyed reported that business conditions had improved, while 32% responded that conditions had worsened.
Richmond Fed Manufacturing Survey Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, reported manufacturing activity in the region improved slightly, rising from a reading of -8 to 0 in September. Improvements over the month included an increase in new orders and shipments, though employment declined sharply.
Texas Manufacturing Outlook Survey Meanwhile, Texas manufacturing activity rose modestly in September, rising 8 points to an expansionary reading of 9.3, propelled by a rise in capacity utilization and increased shipments. Demand softened, however, with the new orders index sinking to -6.4 and the general business activity index falling further, from -12.9 to -17.2.
The survey’s employment index held at a elevated reading of 15, indicating continued job growth and hiring in the sector.
Kansas City February Manufacturing Survey Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) slowed in September, hitting a level of 1—the lowest composite reading the survey has reported since July 2020.
The slower pace of growth was attributable to less activity at facilities that manufacture durable goods, such as furniture, nonmetallic minerals, primary metals, and transportation equipment.
However, manufacturers in the region remained optimistic, with nearly half of the companies surveyed reporting plans to expand operations over the next six months.
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