“October order books are the strongest we have seen in the past six months.”
U.S. manufacturing activity soared to a two-year high in October, according to the Institute for Supply Management’s monthly Report on Business. According to the ISM, industrial activity rose 3.9% in October, hitting a level of 59.3%, hitting a level not seen since September 2018 and representing the sixth straight month of expansion for the economy overall.
October’s surge in manufacturing activity was led by new orders and production, while employment, a component of the index that has been struggling, finally crossed into expansion for the first time in fourteen months.
Optimism among executives continues to be strong, with two positive comments registered for every cautious comment. In September, optimism hit a level not seen since the onset of the pandemic, with 2.3 positive comments for every negative comment.
Said Timothy Fiore, Chairman of the ISM: “Survey Committee member reported that their companies and suppliers continue to operate in reconfigured factories; with every month, they are becoming more proficient at expanding output.”
Fiore went on to say that key indicators such as demand, consumption and inputs registered high levels. “While certain industry sectors are experiencing difficulties that will continue in the near term, the overall manufacturing community continues to exceed expectations.”
One executive in the chemical products industry stated, “Business continues to be robust. Sales are greater than expectations, and cost pressures are modest. There is posturing by suppliers on market price increases for corrugated and polypropylene, yet no firm price increases at this time. We expect a strong finish to 2020 and a solid start in 2021.”
Many executives reported that although business is not quite yet at pre-pandemic levels, it is still heading in the right direction.
Of eighteen industries, fifteen reported growth in October (compared to fifteen in July). Growth was led by apparel, leather & allied products; fabricated metal products; nonmetallic mineral products; food, beverage & tobacco products and plastics & rubber products.
Just two industries posted declines: textile mills & printing/related support activities.
New Orders Rocket to New Highs
The New Orders Index, which has been surging during the recovery, climbed another 7.7% in October, hitting a level not seen since January 2004.
One respondent on the fabricated metal sector reports “Continue to see increases in customer demand. We still are not back to pre-COVID-19 levels but are continually improving.”
Another in the paper products sector reported ““October order books are the strongest we have seen in the past six months.”
Yet another in the plastics & rubber industry stated “We continue to see stronger month-over-month orders in plastic injection molding.”
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Sixteen of eighteen industries reported an uptick in new orders for October, led by apparel, leather & allied products; wood products; plastics & rubber products; and primary metals.
Manufacturing Production Improves
For a fifth straight month, manufacturing production registered growth, with the ISM’s Production Index climbing 2% in October to a level of 63%.
Eleven of eighteen industries reported growth in output, led by nonmetallic mineral products; fabricated metal products; plastics & rubber products and primary metals.
The COVID-19 pandemic continued to have an impact on production, with one executive in the food products industry reporting ““Increased production due to stores stocking up for the second wave of COVID-19.”
Employment Leaps into Expansion
The employment index has been one of the soft spots in the otherwise stellar ISM reports over the past several months, with the metric snagged in contraction while others soared. In October, that changed when the ISM’s employment index rose into expansion, hitting a level of 53.2%. Said Fiore,
“For the second straight month, survey panelists’ comments indicate that significantly more companies are hiring or attempting to hire than those reducing labor forces,” says Fiore. An Employment Index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.”
Eleven of eighteen industries reported an increase in hiring for the month of October, led by apparel, leather & apparel products; wood products; food, beverage & tobacco products and fabricated metal products.
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