Economic News: Uninspiring Manufacturing PMI Reports

By at 2 December, 2021, 11:38 am

by Raymond J. Keating –

Depending upon which index of manufacturing purchasing managers’ views one wishes to look at, the topline November story on manufacturing either ranked as a yawner or a bit negative. But fundamental concerns cut across reports.

The yawner comes courtesy of the Institute for Supply Management’s manufacturing PMI report, which pointed to a slight rise in the index, from 60.8 percent in October to 61.1 percent in November.

Timothy R. Fiore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee, reported:

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement. All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products. Coronavirus pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential. However, panel sentiment remains strongly optimistic, with 10 positive growth comments for every cautious comment.”

Meanwhile, the IHS Markit U.S. Manufacturing PMI dropped slightly, from 58.4 in October to 58.3 in November.

The themes struck by Chris Williamson, the Chief Business Economist at IHS Markit, were similar to those from Fiore. Williamson was quoted:

“Broad swathes of US manufacturing remain hamstrung by supply chain bottlenecks and difficulties filling staff vacancies. Although November brought some signs of supply chain problems easing slightly to the lowest recorded for six months, widespread shortages of inputs meant production growth was again severely constrained to the extent that the survey is so far consistent with manufacturing acting as a drag on the economy during the fourth quarter. While demand remains firm, November brought signs of new orders growth cooling to the lowest so far this year, linked to shortages limiting scope to boost sales and signs of push-back from customers as prices continued to rise sharply during the month.”

Williamson also noted that input cost inflation is pointing to “a squeeze on margins.”

Unfortunately, little has changed from recent months’ takes on manufacturing. Supply-chain challenges mean that manufacturers cannot fully meet solid demand. Market players – from entrepreneurs to large and small companies to investors – continue to work on getting the economy back on track.

It would be helpful, of course, if elected officials were working on ways to reduce costs, barriers and obstacles for entrepreneurs, businesses and investors, rather than seeking to erect more roadblocks via higher taxes, more regulation and big spending.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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