Photo Credit: Tinker Air Force Base
On the heels of numerous pandemic-related challenges, U.S. manufacturers are finding they have to pivot once again as business conditions shift. Wondering what the latest data tells us? Get our executive roundup of November's most critical manufacturing business reports, including key takeaways on manufacturing output and capacity utilization, inflation, regional performance, labor, and more.
Executive Summary
• New benchmark data released on container rates find global shipping costs are down 73% over this time last year, suggesting an ease to shipping snarls.
• Supplier deliveries have improved significantly.
• The number of unfilled manufacturing jobs remained elevated at 810,000, while hiring accelerated slightly in October.
• Prices declined further in October after hitting a 2-year low in September.
• Manufacturing output was virtually unchanged in October, with notable increases to motor vehicle production.
• Capacity utilization in manufacturing is still running high, at 1.3% above its long-run average.
• Regional manufacturing surveys show slowing manufacturing activity for all areas of the country.
• However, manufacturers remain optimistic overall, with half of companies in the Plains states region reported plans to hire in the next 6-months.
Manufacturing Output Inches Up; Capacity Running High
U.S. manufacturing production inched up 0.1% in October, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released November 16th. Meanwhile, the index for mining declined a half percent, while the utilities index fell 1.5%. The overall industrial output index decreased 0.1%, according to the Fed’s report.
Notably, the manufacturing output readings for the third quarter of 2022 were revised downward, with September’s gain of 0.5% revised down to 0.1%.
Manufacturing capacity utilization was virtually unchanged in October, with overall capacity utilization for manufacturers running 1.3% above its long-run average.
Manufacturing sectors that saw the sharpest increase in capacity utilization in October included motor vehicle & parts, apparel & leather, machinery, and printing/related support activities. Sectors decreasing capacity included nonmetallic mineral products, petroleum products and furniture.
The automotive sector led output gains in October, with production up 2% last month. This was followed by electrical equipment, up 1.9%; and printing & related support activities, also up 1.9%.
September’s output losses were strongest in wood products, which declined 2.5%; petroleum products, which sank 1.9%; and nonmetallic mineral products, which fell 1.2%.
Year-over-year, aerospace manufacturers saw the largest increase in output, up 11.3%, followed by motor vehicles and parts, up 10.7%. Textile and product mills saw the sharpest year-over-year decline, down 7.1%.
Hiring in Manufacturing Accelerates, Unfilled Positions Elevated
U.S. manufacturers added another 32,000 jobs in October, running ahead of the 22,000 positions the sector added in October, according to the latest from the Bureau of Labor Statistics.
Read more: Hiring Trends in U.S. Manufacturing
In October, employment gains were strongest in computer & electronic products (+5,400 jobs), fabricated metals (+5,200); and nonmetallic mineral products (+3,200).
Gains were offset by losses in wood products (-900), as well as computer and electronic products and textile mills (-700).
Meanwhile, according to the latest JOLTS (Job Openings and Labor Turnover Survey) reported September 12th, the number of unfilled job openings in the sector remains elevated, at 810,000.
Global container rates fall, suggesting an ease in shipping snarls
In October, the Drewey Composite World Container Index, a benchmark for shipping container prices, found that shipping costs have dropped considerably, with prices down 72% over last October, continuing a downward trend seen for 38 consecutive weeks. Prices hit an all-time high during the pandemic and are still elevated above the pre-pandemic mark.
U.S. Manufacturing Activity Skirts Contraction; Supplier Deliveries Improve
Meanwhile, U.S. manufacturing activity remained at a standstill in October, with activity inching down 0.7% to a near-contractionary reading of 50.2%.
Demand remained soft in October, but both employment and output posted growth. Manufacturers continued to see relief from high prices, with the ISM’s prices index declining another 5.1% in October, after hitting a 2-year low in September.
On the bright side, supplier deliveries improved in October, with the ISM’s Supplier Delivery Index posting its best reading since March 2009, ending a six-year streak of slow deliveries.
Eight of eighteen industries surveyed by the ISM reported growth in October, led by apparel, leather and allied products and nonmetallic mineral products.
Comments from manufacturers revealed continued improvements in the labor market and supply chain, yet concerns persist over slowing market demand, global conflicts and a looming recession, with comments suggesting many are looking to more actively promote their businesses.
One respondent in the electrical equipment, appliances, and components stated, “Housing market is down, so our business is affected. Capacity has increased over the last two years due to high orders of consumer goods and appliances, so now we’re trying promotions to get our orders up to where we can use all our capacity.”
Related: Selling in a Downturn: Opportunities & Best Practices
Regional Surveys Reveal a Slowing Sector
Empire State Manufacturing Survey Manufacturing activity in the New York region inched up in November, after having fallen into contraction in October. The results of the latest Empire State Manufacturing Survey, finds the general business conditions index for manufacturers in the region rose 14 points, climbing out of contraction to a reading of 4.5.
The report found that while new orders declined slightly, the employment picture improved significantly, as did shipments.
33% of executives surveyed reported that business conditions had improved, while 29% responded that conditions had worsened. Meanwhile, the index for future business conditions fell 4 points for a reading of -6.1, suggesting manufacturers in the region expect business conditions to worsen in the coming months.
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 weaker manufacturing activity for the region. The survey’s composite manufacturing index fell into contraction in October, plummeting to -10 from 0.
The survey’s readings included a decline in the indexes for shipments and volume of new orders, while the employment index remained unchanged.
Texas Manufacturing Outlook Survey Meanwhile, Texas manufacturing activity expanded at a slower rate in October, with the production index edging down 3 points, but still in expansion territory with a reading of 6. Demand softened, however, with the new orders index sinking to -8.8 and the general business activity index falling further, from –17.2 to -19.2.
Kansas City February Manufacturing Survey. Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) declined at a similar pace in November when compared to October. The survey’s month-over-month composite index for manufacturing activity came in at -6 in November, virtually unchanged from October’s reading of -7. i
The slower pace of growth was attributable to less activity at facilities in the primary metals, plastics & rubber, and fabricated metals sectors.
However, manufacturers in the region remained optimistic, with nearly half of the companies surveyed reporting plans to hire over the next six months, and 71% of companies reported expected high sales as being among the top 3 factory for expanding hiring.
Said one respondent, “Our workload is increasing on a month over month rate with added emphasis on sales. Reducing overhead, increasing efficiency, and getting in front of the customer is paying off.”
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