Manufacturing Grows, but Can’t Shake Supply Chain Issues
The U.S. manufacturing sector marked another month of growth in February, with new orders, production and employment all on the upswing and general optimism increasing as well. However, the Institute for Supply Management (ISM) noted that concerns related to areas such as supply chain continue to weigh on manufacturers.
Food and beverage was one of several sectors showing “strong growth” last month, noted Timothy R. Fiore, chairman of ISM’s Manufacturing Business Survey Committee. “Manufacturing performed well for the ninth straight month, with demand, consumption and inputs registering strong growth compared to January,” Fiore said. “Labor market difficulties at panelists’ companies and their suppliers continued to restrict manufacturing economy expansion and will remain the primary headwind to production growth until employment levels and factory operations can return to normal across the entire supply chain.”
ISM’s purchasing managers’ index reached 60.8 percent in February, 2.1 percentage points higher than the January reading. It was the highest reading since February 2018, the organization said.
“We anticipate a fast and large order surge in the foodservice sector as restaurants open back up.”
Fiore added that optimism among manufacturing professionals increased in February, “with five positive comments for every cautious comment, compared to a 3-to-1 ratio in January.” Nonetheless, participants in ISM’s monthly survey suggested plenty of concerns that might keep them up at night.
“We have experienced a higher rate of delinquent shipments from our ingredient suppliers in the last month,” said one representative of a food and beverage processor. “We are still struggling keeping our production lines fully manned. We anticipate a fast and large order surge in the foodservice sector as restaurants open back up.”
“Prices are going up, and lead times are growing longer by the day,” commented another participant. “While business and backlog remain strong, the supply chain is going to be stretched very [thin] to keep up.” A representative of the appliances sector, perhaps reacting to the semiconductor shortage, was blunter in his or her assessment: “Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages.”
Fiore observed that “suppliers continue to struggle to deliver, with deliveries slowing at a faster rate compared to the previous month. Transportation challenges and challenges in supplier labor markets are still constraining production growth — and to a greater extent compared to January.”
The full ISM report can be found here.