New Data Calls Out U.S. Manufacturers’ Biggest Pain Points

Updated: May 18

By Sourcing Journal


This article was published in Sourcing Journal May 2, 2022.


Economic activity in the U.S. manufacturing sector grew in April, with nearly all sectors posting an increase led by apparel, leather and allied products, and including furniture and related products, and textile mills, supply executives said in the “Manufacturing ISM Report on Business” from the Institute for Supply Management (ISM).

Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said the April Manufacturing Purchasing Managers Index (PMI) registered 55.4 percent, a decrease of 1.7 percentage points from the March reading of 57.1 percent, the lowest since July 2020. A Manufacturing PMI above 48.7 percent, over a period of time, generally indicates an overall economic expansion.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Fiore said. “In April, progress slowed in solving labor shortage problems at all tiers of the supply chain. Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets. April saw a slight easing of prices expansion, but instability in global energy markets continues.”


He noted that panel sentiment remained “strongly optimistic regarding demand,” although the three positive growth comments for every cautious comment marked a decline from March’s ratio of 6-to-1. Panelists continued to cite supply chain and pricing issues as their biggest concerns.


“Manufacturing performed well for the 23rd straight month, with demand registering slower month-over-month growth likely due to extended lead times and decades-high material price increases, and consumption softening due to labor force constraints,” Fiore said. “Overseas partners are experiencing Covid-19 impacts, creating a near-term headwind for the U.S. manufacturing community–15 percent of panelists’ general comments expressed concern about their Asian partners’ ability to deliver reliably in the summer months, up from 5 percent in March.”


ISM’s New Orders Index registered 53.5 percent in April, a decrease of 0.3 percent compared to March. A New Orders Index above 52.9 percent is consistent with an increase in the Census Bureau’s series on manufacturing orders.


Of the 18 manufacturing industries, 11 reported growth in new orders in April, including furniture and related products, while textile mills reported a decline in new orders in April.

The Production Index came in at 53.6 percent in April, down 0.9 percent from March. An index above 52.4 percent usually coincides with an increase in the Federal Reserve Board’s Industrial Production figures.


The 14 industries reporting growth in production during April included furniture and related products, as two industries reporting a decrease in April included textile mills.

ISM’s Employment Index declined 5.4 percent to 50.9 percent in April.


“An overwhelming majority of panelists again indicate their companies are hiring, as 89 percent of Employment Index comments were hiring focused,” Fiore said. “Employment levels, driven primarily by turnover and a smaller labor pool, remain the top issue affecting further output growth.”


An Employment Index above 50.5 percent is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Of 18 manufacturing industries, nine industries reported employment growth in April, topped by apparel, leather and allied products and textile mills.


The delivery performance of suppliers to manufacturing organizations was slower in April, as the Supplier Deliveries Index was 67.2 percent, 1.8 percent higher than March. A reading below 50 percent reflects faster deliveries, while a reading above 50 percent indicates slower ones.


Of 18 manufacturing industries, 16 reported slower supplier deliveries in April, led by apparel, leather and allied products, and including textile mills and furniture and related products.

The Inventories Index registered 51.6 percent in April, 3.9 percent below March. An Inventories Index greater than 44.4 percent usually ties into expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories. Apparel, leather and allied products, and textile mills reported the highest inventories in April.


ISM’s Customers’ Inventories Index rose 3 percent to 37.1 percent in April, indicating that customers’ inventory levels were considered too low, even with the month-over-month increase.


“Customers’ inventories are too low for the 67th consecutive month, a positive for future production growth,” Fiore said.


Only apparel, leather and allied products reported customers’ inventories as too high in April, while 13 industries reporting customers’ inventories as too low, including furniture and related products.


The ISM Prices Index registered 84.6 percent, down 2.5 percent compared to the March, with oil and fuel price increases, manifesting in higher transportation expenses; food ingredients, commodity materials and petroleum-derived products the primary causes of prices growth. A Prices Index above 52.6 percent is generally consistent with an increase in the BLS Producer Price Index for Intermediate Materials.


In April, 17 of 18 industries reported paying increased prices for raw materials, topped by apparel, leather and allied products, and including textile mills and furniture and related products.


ISM’s Backlog of Orders Index hit 56 percent in April, a 4 percent decrease from March. Ten industries reported growth in order backlogs in April, led by apparel, leather and allied products, and including furniture and related products. The two industries reporting lower backlogs in April included textile mills.


ISM’s New Export Orders Index was down 0.5 percent to 52.7 percent in April, as customer demand from overseas fell due to Covid-19 in Asia and the war in Ukraine, Fiore noted.

ISM’s Imports Index registered 51.4 percent in April, a decrease of 0.4 percent compared to March, its lowest reading since it in October.


“Import demand remains strong, but will likely continue to be challenged through Q2 and Q3 of 2022, due to Covid-19 in Asia and upcoming union and management negotiations at West Coast ports,” Fiore added.

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