@Mikhail Gnatkovskiy| Dreamstime
Continued Growth,  Continued Commodity Shortages

Continued Growth, Continued Commodity Shortages

Oct. 7, 2021
Demand for products is up, and finding stable workers and cost-effective supplies is challenging, according to ISM.

According to the latest manufacturing business report from the Institute for Supply Management, the September Manufacturing PMI grew 1.2 points to 61.1%, up from August’s 59.9%. The manufacturing economy as a whole grew for a sixteenth month in a row since contraction in April 2020.

The ISM’s New Orders index remained unchanged at 66.7%. Production fell 0.6 points to 59.4% from 60.0% in August. Employment resumed growth from a slight dip in August to hit 50.2%, up 1.2 from August (49.0%).

The story is the same as it has been for the past several months of manufacturing. Demand for products is up, and finding stable workers and cost-effective supplies is challenging. Despite those challenges, manufacturers are taking the long view and mostly remain optimistic, according to Timothy Fiore, president of the Institute for Supply Management’s Business Survey Committee. Fiore noted that survey respondents made about three positive comments about growth to every cautious comment.

“Manufacturing performed well for the sixteenth straight month,” said Fiore, “with demand, consumption and inputs registering month-over-month growth in spite of continuing unprecedented obstacles and ever-increasing demand.”

Shortages and increased prices of commodities used by manufacturers are still bedeviling U.S. industry across the board.

The price of aluminum has increased now for 16 months in a row alongside the trend in manufacturing growth. Other commodities up in price for longer than a year include polypropylene (15 months up in price), steel (14 months), and plastic resins (13). Electrical and electronic components were listed as up in price for a tenth month each, and semiconductors marked an eighth more expensive month.

The prized computer chips were marked again as in short supply, now for a tenth month, alongside steel and electronic components. The commodity that has been in short supply for the longest period, electrical components, has been difficult to source for a full year now.

In one positive sign for the wood products industry, the only segment last month that didn’t see growth, lumber was not counted by the ISM as up in price or in short supply in September. After more than 12 months of rising prices, lumber is now counted by the ISM as an increasingly cheap commodity.

Executives surveyed by the CEO revealed individual difficulties faced by their specific industries. A chemical products executive lamented that Hurricane Ida had placed “additional stress on an already fragile supply chain.” A leader of a furniture-related company said supply from Southeast Asia is still threatened directly by COVID-19 outbreaks. And an executive for a paper products company expressed amazement at the tightness of the labor market.

“We used to have 100 applicants for an opening,” the paper products executive said. “We are now seeing about 10—and often, the applicant does not show for the interview.” A fabricated metal products executive said that some in-house machining had to be outsourced “due to a lack of experienced machinists,” negatively impacting production.

One respondent, an executive in electrical equipment, noted that growth “has been extremely good for the year,” but predicted manufacturing’s long struggles with supplies is far from the end. They noted that their company was now having difficulty sourcing commodities other than chips and electronics.

“Lead times are extending, shipping lanes are slowing, and we will not see an end to this in 2021,” they predicted.

Latest from Global Supply Chain