Business of Engineering

Manufacturing index records fifth straight month of industry growth

The purchasing manufacturers' index registered at 55.4% in September, down slightly from August, as cautious optimism abounds due to COVID-19.

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

Economic activity in the manufacturing sector grew in September, with the overall economy notching a fifth consecutive month of growth. The Institute for Supply Management’s Purchasing Manufacturers’ Index (PMI) registered 55.4% in September, which is down from 56% in August. New orders and production dropped several points compared to August, though they are still above 60% overall. Employment rose by three points in September, which is an encouraging sign for the manufacturing industry.

Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, said in a press release: “After the COVID-19 pandemic brought manufacturing activity to historic lows, the sector continued its recovery in September. Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories and are becoming more proficient at maintaining output. Panel sentiment was optimistic (2.3 positive comments for every cautious comment), an improvement compared to August.”

The report cited that food, beverage and tobacco products was the best-performing sector amongst the biggest manufacturing industries, which is not a surprise given the high demand for basic goods and services during the pandemic. Fabricated metal products and chemical products also registered high growth. Petroleum and coal products, however, has continued struggling during the pandemic. Fourteen of the 18 manufacturing industries reported growth

“Manufacturing performed well in the 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 manufacturing community as a whole has learned to conduct business effectively and deal with the variables imposed by the COVID-19 pandemic,” Fiore said.

What respondents are saying

  • “Still struggling with long lead times for components coming from China [contract manufacturers].” (Computer & electronic products)
  • “Volume remains lower than one year ago but has steadily improved over the past two periods.” (Chemical products)
  • “Business is booming, and the supply chain has been caught off guard. We are working closely with our suppliers to ensure supply and try to control costs. The resin industry, along with plastics, is driving cost increases and scarce availability.” (Transportation equipment)
  • “Our business has not begun to recover.” (Petroleum & coal products)
  • “Overall business conditions are improving, but not at the rates we saw them decline.” (Fabricated metal products)
  • “Our customer order intake is increasing significantly for deliveries in the first half of 2021. Outlook is generally positive.” (Machinery)
  • “Retail sales remain strong, but food service is still down about 15% year-over-year. All of our factories are still struggling with manning shifts due to positive COVID-19 cases and/or quarantine because employees came in contact with someone who contracted the virus.” (Food, beverage & tobacco products)
  • “Demand remains high, strong finish to 2020 projected, with an even stronger 2021 fiscal year. Prices have increased in certain categories, but no major price increases of our own have been implemented yet. We are seeing an uptick in reshoring opportunities in the third quarter across various industries and products.” (Electrical equipment, appliances & components)
  • “We are seeing a marked increase in international demand in Q4 compared to Q2 and Q3. Still not at historical levels; however, a positive outlook.” (Paper products)
  • “Raw material shortages, especially of hardwood logs, are starting to impact overall supply. Domestic market demand is fragmented but remains sound. Export demand, especially to China, is robust.” (Wood products)
  • “Business has continued to be strong, with September following August. October is also shaping up to be a good sales month as well.” (Plastics & rubber products)

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