Manufacturing Orders Down, Prices Up Amid War in Ukraine, China Shutdowns

By Supply Chain Dive

This article was published in Supply Chain Dive April 7, 2022.

Dive Brief:

  • Rising prices and sagging exports hurt manufacturing orders during the typically busy month of March, amid Russia's invasion of Ukraine and COVID-19 shutdowns in China, according to the Institute for Supply Management's monthly Manufacturing Business Survey.

  • Companies that took four to six months to pass on cost increases last year are raising them sooner in anticipation of higher energy prices, Committee Chair Timothy R. Fiore said on a media call on April 1. "Those energy prices, feedstock prices, tend to make their way into everything."

  • Persistent extended lead times, which have pushed many companies to place orders in advance, could ease sometime in the summer, Fiore said.

Dive Insight:

March is typically the biggest month of the year for new orders as companies stock inventory for summer and fall. Demand remains strong, with inventories remaining low for the 20th straight month.

But as procurement teams continued to face inflated prices, difficulty procuring raw materials, and extended lead times last month, some paused to see if conditions would improve, Fiore said.

"If I was at a buying desk, and I had my orders laid out well in excess of my normal order stream needs, I probably wouldn't be rushing to place orders in the month of March [amid] high prices," Fiore said.

"Lead times have forced buyers to place orders out further," he added. "But that also means that they can pause a little bit with the expectation that maybe prices will come back down a little bit and maybe lead times should ease … most likely sometime in the summer."

Supply chain comments again made up the bulk of respondents' concerns. Rising prices — respondents' chief worry — were the subject of 39% of the survey responses, up from 30% in February, Fiore said.

The number of comments about delivery issues fell from 50% in February to 39% in March, indicating that rising prices are replacing — or at least matching — concerns among manufacturers about deliveries.

"The top-of-mind issue for supply managers in March was really rising prices," Fiore said.

Seventy-five percent of the respondents said they raised prices in March, up from 56% in February, he said.

Export orders slowed, with 8% of respondents reporting lower new export orders, compared to 3% the prior month. "The European conflict and COVID impacts in Asia caused companies to slow their new export orders," Fiore said.

Labor and transportation challenges eased slightly from the previous month, according to the survey.

"Production growth rate remains weak relative to demand and backlog, but the labor market is back on improvement which should release the production number and allow it to reach its potential," Fiore said.

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