Key Takeaways from the September ISM Manufacturing Report

In early October, the Institute for Supply Management (ISM) released its latest Report on Business, a monthly publication that provides analysis of industry trends and statistics relevant to the manufacturing industry based on surveys of purchasing and supply executives.

The report evaluates the state of the industry and focuses on areas like new orders, backlog status, inventory levels and prices. The overall attitude of the latest report seems to present an outlook of optimism, with evidence of continuing month-over-month growth, despite a rising number of challenges.

The Purchasing Managers Index (PMI), an indicator of the prevailing direction of economic trends in the manufacturing and service sectors, is utilized to predict the state of the economy and the growth or contraction present within the industry. A PMI metric over 50% is considered to be in a growth state, while one less than 50% is in a contraction state. PMI grew to 61.1% in September, up from 59.9% in August, marking the 16th straight month of growth. But while the industry has continued to see expansion each month since the shutdowns in April 2020, manufacturers are highly concerned about the prevailing labor shortage and the current state of supply chains. Almost half the companies surveyed indicated that hiring difficulties continue to persist and the problem seems to be worsening, with the workforce continuing to turn over due to retirements and other employment departures.

Companies are also expressing concerns over the supply chain. Delivery performance of all six top manufacturing industries (Fabricated Metal, Food, Beverage and Tobacco Products, Petroleum and Coal, Chemicals and Transportation) slowed in September, with supplier hiring challenges, raw material lead time and inflation the key issues.

Yet while challenges persist, the majority of industries surveyed have reported growth, with only the wood product industry showing a contraction in September. Demand continues to rise, shutdowns are lessening and being managed appropriately, and consumption has grown, all trends that bode well for the future of the industry, assuming the kinks can be worked out.