"Can’t meet demand due to shortages of labor, components, and materials. And facing soaring input costs, they’re jacking up prices at record pace.
Manufacturers struggled to ramp up production to meet rising demand, hampered by
material and component shortages,
labor shortages,
difficulties in keeping employees because they’re going after better opportunities,
long lead times,
shipping delays,
port congestion in the US and China,
rolling blackouts in China,
and transportation chaos.
Getting goods out of Asia is particularly tough.
They’re having to pay more for everything, and they’re passing on those cost increases via record price increases, and they’re not seeing any letup of those increases in costs and prices.
That’s about the summary of what executives of US-based manufacturer said in the two manufacturing Purchasing Managers Indices (PMIs) released today, the “IHS Markit U.S. Manufacturing PMI,” and the “Manufacturing ISM Report On Business.”
According to the IHS Markit U.S. Manufacturing PMI:
On one hand, there was a “steep rise in new business at manufacturing firms” and a “historically elevated” expansion in new orders
– though that growth was slower than the records of the prior 10 months
– according to the IHS Markit PMI.
On the other hand, there were “capacity constraints,”
including material shortages,
labor shortages,
lead times that were “among the most marked on record,”
“too extensive” delivery times,
“a lack of input availability,” and
“a severe deterioration in vendor performance.”
So, unable to meet demand, production increased but at the slowest rate of increase in 10 months.
And backlogs of work rose “at one of the sharpest paces on record as firms grappled with pressure on capacity.”
Input costs for manufacturers in October along with August and September rose at the fastest rate “since data collection began in May 2007,”
amid “hikes in vendor prices and greater transportation surcharges.”
Manufacturers “continued to partially pass on higher costs to clients,” with their price increases accelerating to “the fastest pace on record.”
Manufacturers purchased more inputs, despite rising costs.
But “stocks of purchases rose only modestly.
And “stocks of finished goods fell solidly.”
The Manufacturing ISM Report On Business:
“October saw US manufacturers report yet another near-record lengthening of supply chains,
with shortages of components constraining production growth to the lowest since July of last year,” according to the Manufacturing ISM Report On Business.
“Supply and labor constraints” pushed the growth of production “below the pre-pandemic long-run average.”
... “Congestion at ports in China and the U.S. continues to be a headwind, as transportation networks remain stressed,” the report said.
“All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.”
Meeting demand is also hampered by “hiring difficulties and a clear cycle of labor turnover:
As workers opt for more attractive job opportunities, panelists’ companies and their suppliers struggle to maintain employment levels.”
“Worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions, and overseas supply chain problems” continued hamper manufacturing growth potential.
“The Prices Index expanded for the 17th consecutive month, at a faster rate in October, indicating continued supplier pricing power and scarcity of supply chain goods.”
Selling prices that manufacturers charged their clients rose at a record pace, and “inflationary pressures continue to build and look unlikely to abate to any significant degree any time soon.”
Inventories expanded faster for the wrong reasons, because work-in-process inventory was held longer “due to key part shortages”;
and more finished goods inventory was held “due to downstream customer issues.”
What some of the executives on the ISM panel said:
“Global supply chain issues continue.
Getting anything from China is near impossible – extreme delays.
Microchip and circuit breaker shortages continue and are expected to continue into 2022.” [Computer & Electronic Products]
“Business is getting stronger, but the supply chain is getting worse every day.” [Chemical Products]
“Demand continues to be strong, but we continue to be held back by supply chain issues – logistics delays, as well as capacity and labor issues at suppliers.” [Electrical Equipment, Appliances & Components]
“Strong sales continue; however, we have diverted chips (semiconductors) to our higher-margin vehicles and stopped or limited the lower-margin vehicle production schedules.” [Transportation Equipment]
“Import costs and delays hurting business, requiring more safety stock for uncertainty. Rolling blackouts in China starting to hurt shipments even more.” [Food, Beverage & Tobacco Products]
“Business remains strong, with brisk incoming orders. We have become much more supply driven versus demand driven, due to shortages of labor, materials and freight. Costs continue to increase on all fronts, and we are considering our third price increase of the year for our customers.” [Furniture & Related Products]
“Customer demand remains high. COVID-19 related supply chain issues still hamper our ability to meet demand. Labor is still difficult for our suppliers to obtain, and labor costs are rising.” [Machinery]
“Demand for our products remains strong, but we continue to struggle to secure enough raw material to keep our manufacturing lines running.” [Miscellaneous Manufacturing]"
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