The U.S. manufacturing sector continued to expand in October as growth remained positive despite supply chain constraints.
The Purchasing Managers’ Index inched down to 60.8 from 61.1 in September, but still posted the 17th straight month of expansion since April 2020, according to a report from Institute of Supply Management on Monday. A reading above 50 indicates expansion.
The report also showed that demand continued to be strong as the indices for overall new orders and new export orders stayed in expansion mode at 59.8 and 54.6, respectively.
Supply chain disruptions were a drag on growth as customers’ inventories were at a low level while backlogs of orders were high.
But supply chain disruptions were a drag on growth as customers’ inventories were at a low level while backlogs of orders were high.
“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,” the report said.
There was also increasing risk from China, as some respondents pointed out how difficult it was to get their shipments out of the country because of the recent COVID-19 lockdowns in multiple cities, as well as the slowdown of Chinese economic activity in recent months.
As domestic demand outstripped supply, prices paid for input materials accelerated on the month as the prices index rose to 85.7%, a 4.5 percentage point increase compared to 81.2% in September.
The takeaway
For manufacturing, the big picture continued to center around solid demand and shortages of supply, which slowed down potential growth. But it is important to remain optimistic because the sector will not stop its expansion anytime soon, especially as the supply-chain crunch is expected to ease next year.
