While economic activity in the manufacturing sector increased in December, according to ISM, there are still supply chain constraints.
"The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with indications of improvements in labor resources and supplier delivery performance, said Timothy R. Fiore, CPSM, C.P.M., Chair of ISM's Manufacturing Business Survey Committee, in a statement.
"Shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products continue to plague reliable consumption," he added. " Coronavirus pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, employee turnover and overseas supply chain problems — continue to impact manufacturing."
The December manufacturing PMI registered 58.7%, a decrease of 2.4 percentage points from the November reading of 61.1%.
"Manufacturing performed well for the 19th straight month, with demand and consumption registering month-over-month growth," says Fiore." Meeting demand will remain a challenge, due to hiring difficulties and a clear cycle of labor turnover at all tiers. For the second month in a row, Business Survey Committee panelists' comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover. Supplier delivery rate improvement was indicated by the Supplier Deliveries Index softening in December. Transportation networks, a harbinger of future supplier delivery performance, are still performing erratically; however, there are signs of improvement.
Index Reports
- The New Orders Index registered 60.4%, down 1.1 percentage points compared to the November reading of 61.5%.
- The Production Index registered 59.2%, a decrease of 2.3 percentage points compared to the November reading of 61.5%.
- The Prices Index registered 68.2%, down 14.2 percentage points compared to the November figure of 82.4%.
- The Backlog of Orders Index registered 62.8%, 0.9 percentage point higher than the November reading of 61.9%.
- The Employment Index registered 54.2%, 0.9 percentage point higher compared to the November reading of 53.3%.
- The Supplier Deliveries Index registered 64.9%, down 7.3 percentage points from the November figure of 72.2%.
- The Inventories Index registered 54.7%, 2.1 percentage points lower than the November reading of 56.8%.
- The New Export Orders Index registered 53.6%, a decrease of 0.4 percentage point compared to the November reading of 54%.
- The Imports Index registered 53.8%, a 1.2-percentage point increase from the November reading of 52.6%."
All of the six biggest manufacturing industries — Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Petroleum & Coal Products, in that order — registered moderate-to-strong growth in December.
WHAT RESPONDENTS ARE SAYING
- "Chemical supply chains are filling very slowly. Still not full, but (my) gut feeling says it's getting easier to source chemical raw materials." [Chemical Products]
- "Continued strong demand has our production facilities producing as many vehicles as we have materials for; however, capacity is limited due to the global chip shortage." [Transportation Equipment]
- "Lowered oil prices due to (the) omicron variant has caused concern around production and capital spend in 2022." [Petroleum & Coal Products]
- "Labor is still tight, and turnover continues. Supply chain issues are is still causing customer order cuts. Trucks are scarce, and the teams are burned out from working long hours and dealing with supply constraints daily." [Food, Beverage & Tobacco Products]
- "Price increases appear to be slowing. Lead times are shrinking slowly, and inventories are growing. I hope we have reached the top of the hill to start down a gentle slope that lets us get back to something that resembles normal." [Fabricated Metal Products]
- "Business continues to be good, with strong incoming orders from customers. Continue to battle labor, material and transportation pressures." [Furniture & Related Products]
- "Construction projects for 2022 and 2023 look very strong for us." [Nonmetallic Mineral Products]
- "Costs for steel seem to be coming down some. We have seen a little relief on steel prices, but they are still very high. Overall performance by suppliers has improved. On-time deliveries have improved." [Machinery]
- "Supply chain interruptions have dramatically increased in the fourth quarter. Many of our suppliers are unable to deliver product until January or February 2022 or later." [Miscellaneous Manufacturing]
- "Very robust order activity. Backlog increased. Plastic raw material shortages impact orders." [Plastics & Rubber Products]
