U.S. manufacturing activity hit a level not seen in three years, according to the Institute for Supply Management’s monthly Report on Business. The ISM reports manufacturing activity surged 2.1%, hitting a level of 60.8% in February – the strongest reading since February of 2018. Any reading above 50 is considered expansionary and the U.S. manufacturing sector is now in its ninth straight month of expansion, according to the ISM.
New orders, production and employment all advanced in February. Meanwhile, supplier deliveries slowed at a faster rate, inventories continue to sink and both imports and exports are on the rise.
Optimism among manufacturing executives soared in February, with 5 optimistic comments for every cautious comment (compared to the 3 to 1 ratio reported last month).
However, the sector is facing some major challenges, with many of the comments reflecting shortages in supplies, surging prices and difficulty finding skilled workers to help fulfill surging orders.
Said Timothy Fiore, Chairman of the ISM: “The manufacturing economy continued its recovery in February. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories. Absenteeism, short-term shutdowns to sanitize facilities and difficulties in hiring workers continue to cause strains that limit manufacturing growth potential.”
One executive in the computer & electronic products industry, “The coronavirus [COVID-19] pandemic is affecting us in terms of getting material to build from local and our overseas third- and fourth-tier suppliers. Suppliers are complaining of [a lack of] available resources [people] for manufacturing, creating major delivery issues.”
Of eighteen industries, sixteen reported growth in the month of February. Growing industries included textile mills; electrical equipment, appliances and components; primary metals; paper products and chemical products.
Printing and related support activities and petroleum & coal products were the only two industries to post contraction.
The ISM listed several commodities in short supply, including aluminum; corrugated boxes, electrical components, plastic products, polypropylene, propylene, semiconductors, and various types of steel, such as cold rolled steel, hot rolled steel, specialty steel and steel products.
New Orders Rebound Strongly
New orders expanded strongly in February, climbing 3.7% to 61.1% -- the metric’s ninth consecutive month of growth.
One executive in the primary metals industry said, “We have seen our new-order log increase by 40 percent over the last two months. We are overloaded with orders and do not have the personnel to get product out the door on schedule.”
Another in the textiles industry told the ISM, “A sense of urgency is being felt regarding new orders. Customers are giving an impression that a presence of stability is forthcoming and order flow is increasing.”
Related: 11 Key Takeaways from MNI’s 2021 Survey of Manufacturers
Thirteen of eighteen industries reported an increase in new orders for January, led by paper products; wood products; primary metals; textile mills and electrical equipment, appliances and components.
Only one industry showed a decrease in new orders: miscellaneous manufacturing.
Manufacturers Crank Up Production
Production also expanded in February, shooting up 2.5% to a reading of 60.7%.
February’s reading represents a ninth straight month of growth for manufacturing output.
Fourteen of eighteen industries reported growth in output, led by paper products, textile mills, primary metals, electrical equipment, appliances & components and machinery. Both printing & related support activities and nonmetallic mineral products reported a contraction in production.
Employment Advances Further Into Expansion
The ISM employment index is one metric that has struggled to remain in expansion over the past several months. In February, however, employment advanced at a fast clip, increasing 1.8% to 54.4%.
Industrial companies continue to struggle with the double whammy of COVID-19 and a skilled labor shortage.
Related: Job Openings in Manufacturing Hit All-Time High
Said one respondent in the plastics & rubber products industry, ““Labor shortages at suppliers are affecting material deliveries and prices.”
Eleven of eighteen industries reported employment growth in February, led by electrical equipment, appliances & components; primary metals; miscellaneous manufacturing; machinery; and chemical products.
Tried-and-True Industrial Solutions Since 1912
At MNI, Our goal is to help your business thrive, so whether you’re looking for suppliers, needing to advertise your products and services to manufacturers or hoping to contact decision-makers in the manufacturing world, our industrial solutions are here to support your mission.
