Manufacturing Growth Continues Despite Workforce, Supply Chain Issues

U.S. manufacturing output remains on a growth track, despite a number of challenges—including supply chain disruptions and the labor shortage—showing no signs of easing.

The Institute for Supply Management latest monthly survey shows manufacturing output grew in September for the 16th consecutive month, matching growth in the overall U.S. economy.

“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,” ISM chair Timothy Fiore 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.

“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.”

Lead Times

Released Oct. 1, the survey found the average lead time for production materials increased to 92 days, the highest since the organization started tracking the data in 1987. 

The lead time for maintenance, repair, and operating remained at 45 days, tied with June and August of 2021 as the highest since 1987.

Commitment lead time for capital expenditures skyrocketed to 154 days, up eight days over the previous month, and the longest since 1989.

The average lead time for production materials increased to 92 days, the highest since ISM started tracking the data.

Record high lead times, along with material shortages, rising prices, supply chain issues and, perhaps most significantly, the workforce shortage, combine to present a challenging situation for businesses across the country.

One survey respondent from the transportation equipment industry noted that “labor availability is the most significant supply challenge for our company, with raw materials just behind.”

Another, from the machinery industry, said “our company’s entire supply chain continues to have significant challenges getting manpower, which is impacting production of parts and ability to meet daily build schedules.”

Optimism

Despite these obstacles, the survey indicated “optimistic panel sentiment remains strong,” with several areas of optimism:

• Demand expanded, new orders grew, customers’ inventories grew, and the backlog of orders grew
• Consumption grew slightly
• Inputs (supplier deliveries, inventories, and imports) grew

The U.S. manufacturing sector added 26,000 jobs in September and has now recovered 75% of the 1.38 million jobs lost to pandemic-related disruptions and restrictions in March and April 2020.

Through August, Connecticut’s manufacturing sector has recovered 36% of the 12,700 jobs lost last March and April.

Overall, U.S. employers have recovered 78% of pandemic job losses through September. Connecticut’s overall recovery rate is 69% as of August.