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Manufacturing PMI® at 50.9%; September 2022 Manufacturing ISM® Report On Business®
By: PR Newswire Association LLC. - 03 Oct 2022Back to overview list

New Orders and Employment Contracting; Production and Backlogs Growing; Supplier Deliveries Slowing at a Slower Rate; Raw Materials Inventories Growing; Customers' Inventories Too Low; Prices Increasing at a Slower Rate; Exports Contracting; Imports Growing

TEMPE, Ariz., Oct. 3, 2022 /PRNewswire/ -- Economic activity in the manufacturing sector grew in September, with the overall economy achieving a 28th consecutive month of growth, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

"The September Manufacturing PMI® registered 50.9 percent, 1.9 percentage points lower than the 52.8 percent recorded in August. This figure indicates expansion in the overall economy for the 28th month in a row after contraction in April and May 2020. The Manufacturing PMI® figure is the lowest since May 2020, when it registered 43.5 percent. The New Orders Index returned to contraction territory at 47.1 percent, 4.2 percentage points lower than the 51.3 percent recorded in August. The Production Index reading of 50.6 percent is a 0.2-percentage point increase compared to August's figure of 50.4 percent. The Prices Index registered 51.7 percent, down 0.8 percentage point compared to the August figure of 52.5 percent. This is the index's lowest reading since June 2020 (51.3 percent). The Backlog of Orders Index registered 50.9 percent, 2.1 percentage points lower than the August reading of 53 percent. After a single month of expansion, the Employment Index contracted at 48.7 percent, 5.5 percentage points lower than the 54.2 percent recorded in August. The Supplier Deliveries Index reading of 52.4 percent is 2.7 percentage points lower than the August figure of 55.1 percent. This is the index's lowest reading since before the coronavirus pandemic (52.2 percent in December 2019). The Inventories Index registered 55.5 percent, 2.4 percentage points higher than the August reading of 53.1 percent. The New Export Orders Index contracted at 47.8 percent, down 1.6 percentage points compared to August's figure of 49.4 percent. This is the index's lowest reading since June 2020, when it registered 47.6 percent. The Imports Index remained in expansion territory at 52.6 percent, 0.1 percentage point above the August reading of 52.5 percent."

Fiore continues, "The U.S. manufacturing sector continues to expand, but at the lowest rate since the pandemic recovery began. Following four straight months of panelists' companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand. Demand eased, with the (1) New Orders Index returning to contraction, (2) New Export Orders Index in contraction for a second consecutive month, (3) Customers' Inventories Index remaining at a low level but as close as it's been to an 'about right' reading since early in the pandemic and (4) Backlog of Orders Index approaching contraction. Consumption (measured by the Production and Employment indexes) declined during the period, with a combined negative 5.3-percentage point impact on the Manufacturing PMI® calculation. The Employment Index returned to contraction after one month of expansion, and the Production Index increased by 0.2 percentage point, staying in growth territory, but at a modest level. Many Business Survey Committee panelists' companies are now managing head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand more uncertain. Inputs — defined as supplier deliveries, inventories, prices and imports — accommodated growth. The Supplier Deliveries Index reached an appropriate tension level, and the Inventories Index increased as panelists' companies continued to manage the total supply chain inventory. The Prices Index decreased for a sixth straight month and is not far from contraction territory, and the Imports Index modestly grew.

"Of the six biggest manufacturing industries, four — Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products — registered moderate-to-strong growth in September.

"Manufacturing expanded for the 28th straight month. Panelists' companies slowed hiring activity; month-over-month supplier delivery performance was the best since December 2019; prices growth slowed notably (with the index at 60 percent or lower) for the third consecutive month; and lead times continue to ease for capital equipment and production materials. Markedly absent from panelists' comments was any large-scale mentioning of layoffs; this indicates companies are confident of near-term demand, so primary goals are managing medium-term head counts and supply chain inventories," says Fiore.

Nine manufacturing industries reported growth in September, in the following order: Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components. The seven industries reporting contraction in September compared to August, in the following order are: Furniture & Related Products; Textile Mills; Wood Products; Printing & Related Support Activities; Paper Products; Chemical Products; and Fabricated Metal Products.

WHAT RESPONDENTS ARE SAYING

  • "Supply chain issues for all electronic components and custom build-to-print materials are in short supply due to capacity and skilled labor shortages. Energy cost continues to negatively impact freight cost." [Computer & Electronic Products]
  • "Concerns of global economic slowdown are growing, and (we are) experiencing some customers pulling back orders." [Chemical Products]
  • "Production is steady, allowing reduction of backlog amidst slightly softened demand." [Transportation Equipment]
  • "Almost all suppliers are experiencing lead times growth. It seems no one wants to keep inventory on hand anymore." [Food, Beverage & Tobacco Products]
  • "Business is flat to down due to inflation and interest rates. Hard to find and keep employees due to wage increases by competitors." [Fabricated Metal Products]
  • "Supply chain constraints on many items are still an issue; staffing on the production side continues to be a significant problem. In contrast, we have more stock than needed on some key items — specifically imports — and have begun reducing open purchase orders and decreasing extended forecasts on those items in order to bleed down inventory." [Machinery]
  • "Business continues to be strong. Some commodities within the supply chain are starting to stabilize, while others are still causing disruption for production. Electrical and wiring components continue to cause significant issues. (We) cannot run as consistently as we would like." [Electrical Equipment, Appliances & Components]
  • "Quotes and orders still strong; however, we are not able to accept any new orders for shipment (for the rest of) 2022 due to motor and electronic component shortages." [Miscellaneous Manufacturing]
  • "The supply chain is still stressed, and it challenges our manufacturing plants for uptime. We have strong demand and need to run." [Nonmetallic Mineral Products]
  • "Business is still strong; raw materials are becoming more available, and some raw materials prices are falling." [Plastics & Rubber Products]

 

MANUFACTURING AT A GLANCE

September 2022

Index

Series

Index

Sep

Series

Index

Aug

Percentage

Point

Change

Direction

Rate of

Change

Trend*

(Months)

Manufacturing PMI®

50.9

52.8

-1.9

Growing

Slower

28

New Orders

47.1

51.3

-4.2

Contracting

From Growing

1

Production

50.6

50.4

+0.2

Growing

Faster

28

Employment

48.7

54.2

-5.5

Contracting

From Growing

1

Supplier Deliveries

52.4

55.1

-2.7

Slowing

Slower

79

Inventories

55.5

53.1

+2.4

Growing

Faster

14

Customers' Inventories

41.6

38.9

+2.7

Too Low

Slower

72

Prices

51.7

52.5

-0.8

Increasing

Slower

28

Backlog of Orders

50.9

53.0

-2.1

Growing

Slower

27

New Export Orders

47.8

49.4

-1.6

Contracting

Faster

2

Imports

52.6

52.5

+0.1

Growing

Faster

4

OVERALL ECONOMY

Growing

Slower

28

Manufacturing Sector

Growing

Slower

28

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Adhesives; Copper; Diesel*; Electrical Components (22); Electricity; Electronic Components (22); Freight* (23); Hydraulic Components (2); Labor — Temporary; Natural Gas (15); Paint; Paper (2); Plastic Resins* (9); Rubber Based Products (14); Semiconductors; and Steel — Stainless*.

Commodities Down in Price

Aluminum (5); Diesel*; Freight* (2); High-Density Polyethylene (HDPE) Resin; Lumber — Hardwood; Lumber — Softwood; Methanol; Ocean Freight; Plastic Resins* (4); Polyethylene; Polypropylene (2); Steel (5); Steel — Carbon (3); Steel — Hot Rolled (5); Steel — Stainless* (2); and Steel Products (3).

Commodities in Short Supply

Electrical Components (24); Electronic Components (22); Hydraulic Components (5); Labor — Temporary; Rubber Based Products (4); Semiconductors (22); and Wire Harnesses (2).

Note: The number of consecutive months the commodity is listed is indicated after each item.

*Indicates both up and down in price.

SEPTEMBER 2022 MANUFACTURING INDEX SUMMARIES

Manufacturing PMI® 

The U.S. manufacturing sector grew in September, as the Manufacturing PMI® registered 50.9 percent, 1.9 percentage points below the reading of 52.8 percent recorded in August. "The Manufacturing PMI® continued to indicate sector expansion and U.S. economic growth in September. Of the five subindexes that directly factor into the Manufacturing PMI®, three (Production, Supplier Deliveries and Inventories) were in growth territory. Of the six biggest manufacturing industries, four — Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products — registered moderate-to-strong growth in September. The Production Index increased 0.2 percentage point and remained in expansion territory. The Supplier Deliveries Index slowed at a slower rate while the Inventories Index grew at a faster rate, indicating continued easing of supply chain congestion. Seven of the 10 subindexes were positive for the period; a reading of 'too low' for the Customers' Inventories Index is considered a positive for future production," says Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the September Manufacturing PMI® indicates the overall economy grew in September for the 28th consecutive month following contraction in April and May 2020. "The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for September (50.9 percent) corresponds to a 0.8-percent increase in real gross domestic product (GDP) on an annualized basis," says Fiore.

THE LAST 12 MONTHS

Month

Manufacturing

PMI®

Month

Manufacturing

PMI®

Sep 2022

50.9

Mar 2022

57.1

Aug 2022

52.8

Feb 2022

58.6

Jul 2022

52.8

Jan 2022

57.6

Jun 2022

53.0

Dec 2021

58.8

May 2022

56.1

Nov 2021

60.6

Apr 2022

55.4

Oct 2021

60.8

Average for 12 months – 56.2

High – 60.8

Low – 50.9

New Orders

ISM®'s New Orders Index decreased 4.2 percentage points in September to 47.1 percent compared to 51.3 percent reported in August. This indicates that new order volumes fell back into contraction after one month of expansion. "Of the six largest manufacturing sectors, three —Transportation Equipment; Computer & Electronic Products; and Machinery — increased new orders at a moderate level. The index achieved its lowest level since May 2020, when it registered 32.3 percent. Capital Expenditures and Production Materials lead times remained elevated but have contracted 4 percent and 6 percent, respectively, over the last several months," says Fiore. (For more on lead times, see the Buying Policy section of this report.) A New Orders Index above 52.9 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Of the 18 manufacturing industries, five reported growth in new orders in September: Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Computer & Electronic Products; and Machinery. Eleven industries reported a decline in new orders in September, in the following order: Furniture & Related Products; Wood Products; Textile Mills; Printing & Related Support Activities; Apparel, Leather & Allied Products; Paper Products; Fabricated Metal Products; Chemical Products; Electrical Equipment, Appliances & Components; Primary Metals; and Food, Beverage & Tobacco Products.

New Orders 

%Higher 

%Same 

%Lower 

Net 

Index 

Sep 2022

16.0

62.8

21.2

-5.2

47.1

Aug 2022

17.5

63.1

19.4

-1.9

51.3

Jul 2022

17.2

63.0

19.8

-2.6

48.0

Jun 2022

17.8

65.1

17.1

+0.7

49.2

Production

The Production Index registered 50.6 percent in September, 0.2 percentage point higher than the August reading of 50.4 percent, indicating growth for the 28th consecutive month. "Of the top six industries, only two — Machinery; and Computer & Electronic Products — expanded in September. Materials availability and the labor pool continue to recover, but there is concern about demand beyond the near term," says Fiore. An index above 52.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The eight industries reporting growth in production during the month of September — listed in order — are: Nonmetallic Mineral Products; Primary Metals; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; and Computer & Electronic Products. The seven industries reporting a decrease in production in September — in the following order — are: Textile Mills; Printing & Related Support Activities; Furniture & Related Products; Wood Products; Petroleum & Coal Products; Chemical Products; and Food, Beverage & Tobacco Products.

Production 

%Higher 

%Same 

%Lower 

Net 

Index 

Sep 2022

17.5

64.3

18.2

-0.7

50.6

Aug 2022

17.6

65.4

17.0

+0.6

50.4

Jul 2022

24.9

58.5

16.6

+8.3

53.5

Jun 2022

27.4

60.9

11.7

+15.7

54.9

Employment

ISM®'s Employment Index registered 48.7 percent in September, 5.5 percentage points lower than the August reading of 54.2 percent. "The index returned to contraction territory after one month of expansion. Of the six big manufacturing sectors, two (Machinery; and Food, Beverage & Tobacco Products) expanded. Labor management sentiment shifted in September, with a higher number of panelists' companies pausing hiring through hiring freezes and allowing attrition to reduce employment levels. Turnover rates eased, with 28 percent of comments citing backfill and retirement issues, a decrease from 33 percent in August," says Fiore. An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of 18 manufacturing industries, six reported employment growth in September, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; and Food, Beverage & Tobacco Products. The 10 industries reporting a decrease in employment in September — in the following order — are: Printing & Related Support Activities; Paper Products; Wood Products; Furniture & Related Products; Chemical Products; Fabricated Metal Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; and Transportation Equipment.

Employment 

%Higher 

%Same 

%Lower 

Net 

Index 

Sep 2022

17.5

60.3

22.2

-4.7

48.7

Aug 2022

19.3

68.3

12.4

+6.9

54.2

Jul 2022

22.0

59.4

18.6

+3.4

49.9

Jun 2022

17.9

63.7

18.4

-0.5

47.3

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in September, as the Supplier Deliveries Index registered 52.4 percent, 2.7 percentage points lower than the 55.1 percent reported in August. Of the top six manufacturing industries, four (Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; and Chemical Products) reported slower deliveries. "This indicates the best month-over-month supplier deliveries performance since December 2019, when the index registered 52.2 percent. In September, 83.2 percent of panelists reported 'same' or 'faster' deliveries, compared to 80.4 percent in August. Panelists' comments reiterate that suppliers performed better in September compared to previous months," says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

Ten manufacturing industries reported slower supplier deliveries in September, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Textile Mills; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Primary Metals; Transportation Equipment; Fabricated Metal Products; Computer & Electronic Products; and Chemical Products. Four industries reported faster supplier deliveries in September as compared to August: Electrical Equipment, Appliances & Components; Wood Products; Furniture & Related Products; and Plastics & Rubber Products.

Supplier Deliveries 

 

%Slower 

 

%Same 

 

%Faster 

Net 

 

Index 

Sep 2022

16.8

71.2

12.0

+4.8

52.4

Aug 2022

19.6

71.0

9.4

+10.2

55.1

Jul 2022

21.4

67.6

11.0

+10.4

55.2

Jun 2022

27.4

59.8

12.8

+14.6

57.3

Inventories

The Inventories Index registered 55.5 percent in September, 2.4 percentage points higher than the 53.1 percent reported for August. "Manufacturing inventories expanded at a faster rate compared to August. Of the six big manufacturing industries, five (Petroleum & Coal Products; Machinery; Transportation Equipment; Computer & Electronic Products; and Chemical Products) grew manufacturing raw material inventories in September. Panelists' companies continue to aggressively manage total supply chain inventories through a pausing of order placement in response to slowing in new order rates," says Fiore. An Inventories Index greater than 44.4 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

Of 18 manufacturing industries, the 11 reporting higher inventories in September — in the following order — are: Wood Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Plastics & Rubber Products. The four industries reporting contracting inventories in September are: Textile Mills; Primary Metals; Paper Products; and Fabricated Metal Products.

Inventories 

%Higher 

%Same 

%Lower 

Net 

Index 

Sep 2022

23.0

64.9

12.1

+10.9

55.5

Aug 2022

23.2

62.9

13.9

+9.3

53.1

Jul 2022

25.5

61.8

12.7

+12.8

57.3

Jun 2022

25.4

59.8

14.8

+10.6

56.0

Customers' Inventories

ISM®'s Customers' Inventories Index registered 41.6 percent in September, 2.7 percentage points higher than the 38.9 percent reported for August, indicating that customers' inventory levels were considered too low. "Customers' inventories are too low for the 72nd month in a row, a positive for future production growth. The index registered above 40 percent for the first time after spending 25 consecutive months below that level," says Fiore.

Three industries (Apparel, Leather & Allied Products; Wood Products; and Furniture & Related Products) reported customers' inventories as too high in September. The 11 industries reporting customers' inventories as too low — listed in order — are: Nonmetallic Mineral Products; Transportation Equipment; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Plastics & Rubber Products; Chemical Products; and Food, Beverage & Tobacco Products.

Customers'

Inventories 

%

Reporting 

%Too

High 

%About

Right 

%Too

Low 

Net 

 

Index 

Sep 2022

73

13.5

56.1

30.4

-16.9

41.6

Aug 2022

75

12.2

53.4

34.4

-22.2

38.9

Jul 2022

78

12.4

54.2

33.4

-21.0

39.5

Jun 2022

75

11.1

48.1

40.8

-29.7

35.2

Prices 

The ISM® Prices Index registered 51.7 percent in September, 0.8 percentage point lower compared to the August reading of 52.5 percent, indicating raw materials prices increased for the 28th consecutive month, at a slower rate. This is the second consecutive month the Prices Index registered below 60 percent, a level not seen since August 2020 (59.5 percent), and this is also the lowest reading since June 2020 (51.3 percent). Over the past six months, the index has decreased 35.4 percentage points, including a combined 26-percentage point plunge in July and August. "The slowing in price increases is being driven by continued (1) relaxation in the energy markets, (2) softening in the copper, steel, aluminum and corrugate markets and (3) continuing sluggishness in chemical and plastics demand. Notably, 28.1 percent of respondents reported paying lower prices in September, compared to 26.7 percent in August," says Fiore. A Prices Index above 52.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

In September, 10 of 18 industries reported paying increased prices for raw materials, in the following order: Miscellaneous Manufacturing; Nonmetallic Mineral Products; Printing & Related Support Activities; Primary Metals; Computer & Electronic Products; Paper Products; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products. The seven industries reporting paying decreased prices for raw materials in September — in the following order — are: Wood Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Textile Mills; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.



Prices

%Higher 

%Same 

%Lower 

Net

Index 

Sep 2022

31.4

40.5

28.1

+3.3

51.7

Aug 2022

31.7

41.6

26.7

+5.0

52.5

Jul 2022

41.5

37.0

21.5

+20.0

60.0

Jun 2022

65.2

26.5

8.3

+56.9

78.5

Backlog of Orders

ISM®'s Backlog of Orders Index registered 50.9 percent in September, a 2.1-percentage point decrease compared to the 53 percent reported in August, indicating order backlogs expanded for the 27th straight month. Of the six largest manufacturing sectors, four — Petroleum & Coal Products; Transportation Equipment; Computer & Electronic Products; and Food, Beverage & Tobacco Products — expanded their order backlogs. "Backlogs expanded in September at a slower rate as the New Orders Index level fell, and production expanded minimally in the period. A slowing in price increases is a positive for future new orders growth and backlogs expansion," says Fiore.

Eight industries reported growth in order backlogs in September, in the following order: Plastics & Rubber Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Computer & Electronic Products; Primary Metals; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. Eight industries reported lower backlogs in September, in the following order: Wood Products; Textile Mills; Printing & Related Support Activities; Furniture & Related Products; Paper Products; Fabricated Metal Products; Chemical Products; and Miscellaneous Manufacturing.

Backlog of 

Orders

%

Reporting 

 

%Higher 

 

%Same 

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