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ISM Report Shows Manufacturing Sector Still Growing

ISM Report Shows Manufacturing Sector Still Growing

May 2, 2022
Conditions remain stable in a “demand-driven, supply chain-constrained environment,” says ISM.

U.S. manufacturing continued to grow in April according to the latest figures from the Institute for Supply Management and IHS Markit, despite persistent pressure from ongoing issues like the labor shortage and high component prices.

The ISM’s Purchasing Manager’s Index for U.S. manufacturing fell 1.7 points to 55.4%, while S&P Global (formerly IHS Markit) reported an increase of 0.4 points to 59.2%. Both reports were released May 2.

The two groups’ PMIs appear to differ based on their findings on manufacturing output. The S&P Global report noted that manufacturing output is at its fastest point in nine months, but the ISM found that high rates of turnover are keeping factories from hitting “optimum output rates,” and its Production index fell by 0.9 points to 53.6%.

In the ISM’s report, manufacturing survey committee chair Timothy Fiore noted that the conditions in U.S. manufacturing remain stable in a “demand-driven, supply chain-constrained environment,” and both groups found manufacturers still dealing with longer lead times and shortages of material and labor.

Possibly as a consequence of how long manufacturing has been operating in this challenging environment, both surveys found businesses remain optimistic but less so than before. Companies surveyed by S&P were optimistic about their 12-month output but concerned with inflation and geopolitical tensions: Those concerns pushed confidence there to a half-year low. Manufacturing executives responding to ISM’s survey gave about 3 positive comments to each negative comment, halved from March’s 6:1 positive-negative ratio.

In a sample of responses to the ISM’s survey, business owners noted sustained or improving supply issues and concerns about growing lead times.

“Business is strong. Backlog continues to grow due to new orders and inconsistent supply chain conditions,” said an executive in the electrical equipment and appliances industry.

The reports were split on whether or not progress is being made in manufacturing on labor shortages. The ISM dropped its Employment Index by 5.4 points to 50.9% as respondents cited worse challenges with turnover despite improvement in hiring. The S&P Global survey reported a “solid rise in employment in April” but noted labor shortages continue to weigh on growth.

Both the ISM and S&P reports indicate that U.S. manufacturing is currently performing better than Chinese manufacturing.  Official figures for China showed it had a PMI of 47.4%, indicating contraction, as the country deals with shutdowns from yet another wave of COVID-19.

The issue is not totally confined to China, though, as the latest lockdowns hurt at least some manufacturers who source their supplies there.

Tier-2 supplier shutdowns in Shanghai are causing a ripple effect for our suppliers in other parts of China,” said a chemical products executive surveyed by the ISM, who noted that business otherwise “remains brisk.”

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