Hurricanes create an ill wind, but PMI remains strong

Manufacturing index falls to 58.7% but stays in growth mode despite price increases.

By Bob Vavra, Content Manager, CFE Media November 1, 2017
Manufacturing remained firmly in growth mode in October, according to the monthly PMI reading from the Institute for Supply Management (ISM). Although the index fell from a three-year high of 60.8% in September to 58.7% in October, ISM committee members see a fundamentally strong manufacturing sector that weathered the impact of hurricanes.
“New orders, production, employment, order backlogs and export orders all (continued) to grow in October,” said Timothy Fiore, chairman of the ISM’s Manufacturing Business Survey Committee. “Prices continue to remain under pressure. The Customers’ Inventories Index remains at low levels."
Even with a 2.1 percentage point drop, 16 of the 18 industries surveyed showed growth in October. Higher raw materials prices were recorded for the 20th consecutive month, and some committee members blamed Gulf and Atlantic hurricanes for some of the problem. 
"In plastics processing, Hurricane Harvey is the reason for every price increase being announced — and virtually all suppliers are announcing price increases," said a committee member in the plastics and processing industry. 
Others said the hurricane recovery effort was boosting sales in their sectors. "Incoming orders are strong, mainly due to recovery efforts in the wake of Hurricanes Harvey and Irma,” said a machinery industry committee member. “Backlogs are up due to operating inefficiencies." 
In the chemical products sector, one committee member said, "raw material costs on the rise, but purchasing operation has navigated shortages caused by hurricanes." 
Other committee members were optimistic about manufacturing in their industries. Among the comments:
  • "Ongoing market growth. Minimal impact expected from hurricanes so far in this season." (Miscellaneous Manufacturing)
  • "Business seems to be a bit depressed due to the storms last month, but is picking back up." (Fabricated Metal Products)
  • "Business continues to be better than expected." (Transportation Equipment)
  • "Business is good. Supplier deliveries have extended. Things are really picking up." (Food, Beverage & Tobacco Products)
  • "Our plants are sold out for 2017 — we can’t take any new orders." (Nonmetallic Mineral Products)
October’s reading marked 14 straight months the PMI was above 50%, the threshold for manufacturing growth, and 101 straight months above the economic growth baseline of 43.3%. The index’s average for 2017 is at 57.3%, and hasn’t been below 55% since May. 

Bob Vavra is the Content Manager of Plant Engineering.