The Manufacturing PMI (formerly the ISM Manufacturing Index) is derived from a survey of purchasing managers and their outlook on overall conditions by looking at factors such as orders for durable goods, industrial production, and hiring. It gives a general direction rather than the specific strength of the factory sector and manufacturing activity in the U.S. A reading above 50 is an indicator that the manufacturing sector is growing while a reading below 50 indicates a contraction.
In October, the Manufacturing PMI declined by 0.3 percentage point to a level of 60.8. The reading came in slightly above market expectations, which hovered around 60.3. This marks the seventeenth consecutive month of expansion for the manufacturing industry and for the economy as a whole, as the index remains above 50 points. All six major manufacturing industries registered moderate to strong growth last month, and of the eighteen individual industries that make up the report, only two reported a contraction—wood products and nonmetallic mineral products.
The Manufacturing Index is comprised of several equally weighted subindices that measure conditions in the industry. Despite a number of obstacles, demand and consumption registered growth on a month-over-month basis. However, meeting that demand remains a challenge due to persisting hiring difficulties, continuing supply chain disruptions, and raw material shortages. Congestion at American and Chinese ports is putting pressure on transportation networks and on the supply chain as a whole. Prices continue to increase at an alarming rate, with the Price Index increasing by 5.5% on a month-over-month basis. Annualized, prices in the manufacturing industry are on track to increase by 13.5% for 2021. Therefore, it is not surprising that respondents continue to report price increases as one of their main concerns and most are now passing those costs onto their consumers. Despite those issues, demand remains robust and will likely stay that way given how low customers’ inventories are, with the corresponding index remaining unchanged for the month at 31.7.
November 1, 2021