August manufacturing output shows steady growth, reports ISM

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Manufacturing output in August was flat from July and remained on the positive side of growth, according to the latest edition of the Manufacturing Report on Business released today by the Institute for Supply Management (ISM).

The report’s key measure, the PMI, was 52.8 (a reading of 50 or higher indicates growth), matching July’s PMI, rising, at the same pace, for the 27th consecutive month, as well as the 27th consecutive month overall economic growth.

The August PMI is 4.2% above the 12-month average of 57.0 and, like July, again marked the lowest reading in the past 12 months and also the lowest reading dating back to 52 .4 in June 2020. The highest reading in the past 12 months was 60.8 in October 2021.

The ISM reported that 10 manufacturing sectors rose in August, including: non-metallic mineral products; petroleum and coal products; transportation equipment; Computer and electronic products; printing and related support activities; Plastic and rubber products; primary metals; Machinery; miscellaneous manufacturing; and food, beverages and tobacco. The seven industries experiencing contraction, from July to August, included: Wood Products; Clothing, leather and related products; Furniture and related products; paper products; Chemical products; Fabricated metal products; and electrical equipment, devices and components.

Key report metrics were mixed in August, including:

  • New orders, commonly referred to as the manufacturing engine, rose 3.3% to 51.3 after two months of contraction as six sectors recorded growth in August;
  • Output, at 50.4, rose at a slower pace for the 27th straight month as six sectors recorded growth;
  • Employment, at 54.2, rose 4.3%, following a three-month period of contraction, with nine sectors showing growth;
  • Supplier shipments, at 55.1 (a reading above 50 indicates contraction), lagged July by 0.1%, slowing, to a slower pace, for the 78th consecutive month;
  • The order backlog, at 53.0, rose 1.7%, growing at a faster pace for the 26th consecutive month, with seven sectors showing growth;
  • Inventories, at 53.1, fell 4.2%, rising, at a slower pace, for the 13th consecutive month, with eight sectors growing, and customer inventories, at 38.9, fell by 0.6%, falling “too low”, at a slower pace, for the 71st consecutive month;
  • Prices, at 52.5, fell 7.5%, rising, at a slower pace, for the 27th consecutive month, ending a 23-month stretch to hit the 60 mark, after falling 18 .5% from June to July, the fourth largest sequential decline on record. , dating back to 1948, as well as the largest dating back to a drop of 22.1% in June 2010; and
  • Imports, at 52.5, fell 1.9%, rising at a slower pace for the third consecutive month, while customer inventories fell 0.6% to 38.9, falling too low, at a faster pace, for the 71st consecutive month.

Comments submitted by ISM member respondents highlighted a variety of themes, including: inventory issues; mixed demand levels; and supply chain issues.

“Customer demand is still strong, but a lot of that is because they’re still worried about not getting product due to constraints. They make reservations. There will be a settling of scores in the market when the music stops and everyone’s stocks are inflated,” said a computer and electronics respondent.

In an interview, Tim Fiore, chair of ISM’s Business Survey Committee, said the report ticked all the right boxes, calling it “wonderful”, stretching in the same range over the past three months (the June PMI was 53.0).

“To have three consecutive months at 53 is really good despite everything that’s happened,” he said. “We have seen improvements in supplier deliveries, which have steadily improved from three months ago, and two months ago we started to see prices drop dramatically. And delivery times have started to unwind from records. We have to see if it stays that way; I think it’s okay.”

Fiore also noted how the manufacturing sector’s hiring capacity improved in August compared to June and July and over the past five months.

“It’s a really good report,” he said. “On the demand side, we’ve seen new orders rally back above 50, not dramatically, because those timeframes need to come down a bit more and maybe prices need to come down a bit more for that new number. of order reaches 54. or 55. New export orders have disappointed, but this is not a big surprise, given what is happening in China and Europe.

Looking ahead to the rest of 2022, Fiore said he expects the PMI to be between 51 and 55.

“I don’t see anything more than that,” he said. “Other than a hurricane that pushes the number of supplier deliveries up, I don’t see it going past 55. I don’t think the job numbers will grow much more than where it is. If it stays in the current range, it will be good. We hope that the number of productions will return to the range of 55 and that new orders will be around 52 or 53. That’s where we should be. It seems to be slipping The imbalance between supply and demand is being corrected.

About the Author

Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman


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