U.S. Manufacturing Growth Accelerates In September But Supply Chain Issues Persist

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A report released by the Institute for Supply Management on Friday showed an unexpected acceleration in the pace of growth in U.S. manufacturing activity in the month of September but noted companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand.

The ISM said is manufacturing PMI crept up to 61.1 in September from 59.9 in August, with a reading above 50 indicating growth in the manufacturing sector. The uptick surprised economists, who had expected the index to edge down to 59.6.

"Manufacturing performed well for the 16th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of continuing unprecedented obstacles and ever-increasing demand," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, "Panelists' companies and their supply chains continue to struggle to meet demand due to difficulties in hiring and a clear cycle of labor turnover, as workers opt for more attractive job opportunities."

The report showed the new orders index came in unchanged from the previous month at 66.7, while the production index slipped to 59.4 in September from 60.0 in August.

Meanwhile, the employment index inched up to 50.2 in September from 49.0 in August, indicating modest job growth in the manufacturing sector.

"Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential," Fiore said.

"However, optimistic panel sentiment remains strong, with three positive growth comments for every cautious comment," he added. "Panelists are fully focused on supply chain issues in order to respond to the ongoing high levels of demand."

The supplier deliveries index climbed to 73.4 in September from 69.5 in August, pointing to a slowdown in the delivery performance of suppliers to manufacturing organizations.

The report also showed the backlog of orders index fell to 64.8 in September from 68.2 in August, but a reading above 50 indicated order backlogs expanded for the 15th straight month.

"Backlogs expanded at a lower rate in September compared to August, indicating production was able to keep up with continuing strong new order levels," Fiore said. "However, backlogs remain at historically high levels."

On the inflation front, the prices index rose to rose to 81.2 in September from 79.4 in August, suggesting a modest acceleration in the pace of price growth.

The ISM is scheduled to release a separate report next Tuesday on activity in the service sector in the month of September. The services PMI is expected to dip to 59.8 in September from 61.7 in August.

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