Business of Engineering

Manufacturing index hits highest point in two years

The purchasing manufacturers' index jumped almost 4% to 59.3 in October as new orders, production and employment grow.

By Chris Vavra November 2, 2020
Courtesy: CFE Media and Technology

Economic activity in the manufacturing sector grew in October, with the overall economy notching a sixth consecutive month of growth according to the Manufacturing Institute for Supply Manufacturing (ISM) Report On Business for October. The October purchasers’ manufacturing index (PMI) registered 59.3%, which is up 3.9 percentage points from the September reading of 55.4% and the highest since September 2018 (59.3%).

New orders registered 67.9%, an increase of 7.7 percentage points from September; production registered 63%, an increase of 2 percentage points compared to September. Employment, supplier deliveries and inventories also recorded increases in September. Five of the six biggest manufacturing industries recorded strong levels of growth in September, as well.

“The manufacturing economy continued its recovery in October,” said chairman Timothy Fiore in a press release. “Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories; with every month, they are becoming more proficient at expanding output.

Five of the six biggest manufacturing industries recorded strong levels of growth in September, as well. All but three of the 18 industries included in the report recorded growth.

“Manufacturing performed well for the third straight month, with demand, consumption and inputs registering growth indicative of a normal expansion cycle. While certain industry sectors are experiencing difficulties that will continue in the near term, the overall manufacturing community continues to exceed expectations,” Fiore said.

What respondents are saying

  • “COVID-19 continues to have an effect on supplier support and operations, more from a decreased labor perspective rather than unavailable material.” (Computer and electronic products)
  • “Business continues to be robust. Sales are greater than expectations, and cost pressures are modest. There is posturing by suppliers on market price increases for corrugated and polypropylene, yet no firm price increases at this time. We expect a strong finish to 2020 and a solid start in 2021.” (Chemical products)
  • “Sales continue to be strong — up 4% this September compared to September 2019. The year-to-date level is still 21% below last year due to the [COVID-19] shutdown, but sales are stronger than expected and forecast to stay strong through the first quarter of 2021.” (Transportation equipment)
  • “Increased production due to stores stocking up for the second wave of COVID-19.” (Food, beverage & tobacco products)
  • “Continue to see increases in customer demand. We still are not back to pre-COVID-19 levels but are continually improving.” (Fabricated metal products)
  • “Construction materials have leveled off but continue to be at an all-time high. Mills for board sheet stock have pushed out lead times citing increasing backlogs related to the pandemic and increased supply in the housing market.” (Furniture & Related Products)
  • “Business is almost back to normal levels; however, customers are still cautious with capital spending.” (Machinery)
  • “Business levels have just about returned to pre-COVID-19 levels. Our company is remaining conservative with fixed-cost spending, knowing the uncertainties that lie ahead with COVID-19 and its potential impact globally.” (Miscellaneous manufacturing)
  • “October order books are the strongest we have seen in the past six months.” (Paper products)
  • “We continue to see stronger month-over-month orders in plastic injection molding.” (Plastics and rubber products)

Chris Vavra
Author Bio: Chris Vavra is an associate editor for CFE Media.