Manufacturing ends 2021 with sequential decline but still on a growth path


While declining sequentially, from November to December, manufacturing output remained on a growth path until the end of 2021, according to data released today by the Institute for Supply Management (ISM).

In its Monthly Manufacturing Report, the ISM said the report’s key metric, the PMI, was 58.7 (a reading of 50 or higher indicates growth), down 2.4% from November. This is the 19th consecutive month of growth, at a slower pace, coupled with December also representing the 19th consecutive month of growth for the economy as a whole.

The December 58.7 PMI marks the lowest reading in the past 12 months, corresponding to January, with March’s 64.7 representing the highest reading.

The ISM reported that 15 manufacturing sectors recorded gains in December, including: clothing, leather and allied products; Furniture and related products; Textile factories; Plastic and rubber products; Machinery; Non-metallic mineral products; Various manufacturing; Chemical products; Electrical equipment, apparatus and components; Fabricated metal products; Computer and electronic products; Food, drink and tobacco products; Transport equipment; primary metals; and Petroleum and Coal Products. And the three industries with decreases were: Wood products; Printing and related support activities; and paper products.

ISM also pointed out that the six largest manufacturing sectors – Chemicals; Fabricated metal products; Computer and electronic products; Food, drink and tobacco products; Transport equipment; and Petroleum and Coal Products, in that order, experienced moderate to strong growth in December.

Key indicators in the report were mostly down in December.

New orders, commonly referred to as the engine of manufacturing, fell 1.1% to 60.4, increasing, at a slower pace, for the 19th month in a row, with all six major manufacturing sectors showing moderate growth to strong. levels compared to November. It also marked the 17th time in the past 18 months, in which new orders topped 60.

Output – at 59.2 – fell 1.1% from November, increasing, at a slower pace, for the 19th consecutive month, with four of the six major manufacturing sectors, and 10 in total, posting growth . The ISM said raw material and labor shortages remain a constraint on production growth, with suppliers continuing to struggle, coupled with panellists’ sentiment of labor and labor shortages. materials heading, at a low level, for the second consecutive month.

Employment – at 54.2 – rose 0.9% to 59.2, increasing at a faster pace for the fourth consecutive month. The ISM said eight manufacturing sectors recorded growth, including three of the six largest sectors, fabricated metal products, chemicals and computer electronics. The ISM noted that based on comments from its panelists, companies are still struggling to meet union-management plans, while there were what it called modest signs of progress, for the fourth. consecutive month.

Other notable measures include:

  • Supplier deliveries – at 64.9 (a reading above 50 indicates a contraction) – slowed, at a slower pace, for the 70th consecutive month, after reading 72.2 in November, the delivery performance of suppliers. suppliers to manufacturing organizations slower again in December;
  • The order book, at 62.8, increased 0.9%, increasing at a faster pace for the 18th consecutive month;
  • Inventories – at 54.7 – were down 2.1%, increasing, at a slower pace, for the fifth consecutive month, and customer inventories – at 31.7 – were up 6.6, with a trend too low, at a slower pace, for the 63rd consecutive month; and
  • Prices – at 68.2 – are down 14.2% from November, increasing, at a slower pace, for 19th consecutive month

The comments from ISM member panelists in the report reflected many of the ongoing manufacturing challenges seen in recent months, including supply chain issues, workforce retention issues and rising costs, among others.

“The workforce is still limited and turnover continues. Supply chain issues always lead to reductions in customer orders. Trucks are scarce and teams are exhausted from working long hours and dealing with supply constraints on a daily basis, ”said a Food, Beverage & Tobacco Products panelist.

And a panelist from Divers Manufacturing said supply chain disruptions increased significantly in the fourth quarter, with many of the company’s suppliers not being able to deliver product until January or February 2022 or later. The Omicron variant also gained attention, with a respondent from Petroleum & Coal Products saying the drop in oil prices linked to the variant raised concerns about production and capital spending in 2022.

Tim Fiore, chairman of the ISM Manufacturing Company Inquiry Committee, said in an interview that the December measures represent a timing issue, in terms of transitioning from a better balance between inputs (deliveries from suppliers). , stocks and imports) and issues, with the supplier’s delivery number. decline, as well as prices.

“The number of inventory probably went down because people wanted to dump inventory to free up money… in a year of manufacturing, and it’s probably going to go up,” Fiore said. “The number of jobs has increased further. The production number is not responding as I had hoped, but mostly because of the timing I think. When you get more materials and things go faster, have adequate inventory, hire more people, and demand is high, the production count should have increased, but it doesn’t. . That may mean that in January we could see the production count hit around 65, and without Omicron the jobs count go up to 55 or 55.5, and supplier deliveries hit level 60. “

Fiore added that there are indications that the transport market is improving somewhat, but its progress is being held back by the Omicron variant, which he says will be “a pretty big retarder” for some time because it will reduce employment. number and also again increase the number of supplier deliveries and also increase the inventory count but will not impact new order levels.

“Omicron is much more prevalent than anything we’ve dealt with before, which means unplanned (employee) calls and absenteeism for more than a day,” he said. “As a result, parents cannot go to work, due to an unforeseen situation. It’s happening everywhere. “

About the Author

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

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