After hitting a 38-year high in March, U.S. manufacturing activity eased back slightly, according to the Institute for Supply Management’s monthly Report on Business. The ISM reports manufacturing activity edged back 4% in April to 60.7% in the sector’s eleventh straight month of expansion.
New orders, production and employment all expanded strongly in April – but at a slower rate compared to March. Meanwhile, supplier deliveries slowed at a slower rate, raw material inventories contracted, prices continued to trend up and both imports and exports posted growth.
Optimism among manufacturing executives soared once again, with 11 optimistic comments for every cautious comment (compared to the 8 to 1 ratio in March and the 5 to 1 ratio reported in February).
However, manufacturers are extremely frustrated with high prices and shortages of materials and the sector continues to face many COVID-related challenges.
One executive in the machinery sector reported, ““Widespread supply chain issues. Suppliers are struggling to manage demand and capacity in the face of chronic logistics and labor issues. No end in sight.”
Said Timothy Fiore, Chair of the ISM committee, “Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to the coronavirus impacts limiting availability of parts and materials. Recent record-long lead times, wide-scale shortages of critical base materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy.”
Related: Steel, Semiconductors & More: The Impact of Supply Shortages on U.S. Manufacturers
All of the eighteen industries included in the ISM’s survey reported growth in April, with growth strongest in electrical equipment, appliances & components, textile mills, furniture & related products and machinery.
The ISM listed several commodities in short supply, including steel; lumber; adhesives; aluminum; corrugated boxes; electrical and components.
An executive in the fabricated metals industry stated, “Steel prices are crazy high,” while another in the primary metals industry said, “ The metals markets remain very challenging at best, Shortages of raw materials have increased, especially in aluminum and carbon steel.”
A number of commodities were up in price, including many types of steel, printed circuit boards, paper products, fasteners, electronic components, and aluminum products.
One purchasing executive in the rubber/plastics industry stated, “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…”
New Orders
New orders expanded at a slower rate in April, easing back 3.7% to a reading over 64.3%. Any reading over 50 indicates expansion. April marks the metric’s eleventh consecutive month of growth.
One executive in the machinery industry said, “Demand continues to be very strong. Supply chain delays hamper our availability and ability to sell more.” (Machinery) Another in the furniture sector said “Market capacity in most areas is oversold, with no realistic improvement on the horizon. In fact, it appears that demand will continue to strengthen, leading to more significant disruptions.”
Sixteen of eighteen industries reported an increase in new orders for April, led by electrical equipment, appliances & components; textile mills; fabricated metals; and primary metals.
Production
Production also expanded at a slower rate in April, easing ack 5.6% to 68.1%. This represents the eleventh straight month of growth for manufacturing output.
Fourteen of eighteen industries reported advances in output in April, led by electrical equipment, appliances & components; miscellaneous manufacturing and fabricated metals products.
The easing in production may be related to the shortages of critical materials, especially in certain industries. Says one respondent in the transportation equipment industry, “Continued strong sales; however, we had to trim some production due to the global chip shortage.”
Employment
The ISM employment index also expanded at a slower rate, registering 59.6%, 4.5% lower than March’s reading.
Thirteen of eighteen industries reported employment growth in April, with growth strongest in printing and related support activities; furniture & related products; electrical equipment, appliances & components and fabricated metals products.
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