The latest ISM Manufacturing Report for September reveals surprising strength in the U.S. manufacturing sector despite ongoing global economic uncertainties. The Purchasing Managers' Index (PMI) climbed to 61.1, marking 16 consecutive months of expansion and demonstrating the industry's remarkable resilience.
Key Indicators Signal Robust Growth
The September PMI reading of 61.1 exceeded both the August figure of 59.9 and the 12-month average of 60.4, suggesting accelerating growth momentum. Of the 18 manufacturing industries tracked, 17 reported expansion, with only wood products showing contraction.
Six core industries led the expansion: petroleum and coal products, computer and electronics, chemical products, food beverage and tobacco products, fabricated metal products, and transportation equipment. These sectors collectively form the backbone of U.S. manufacturing output.
Demand Remains Strong Despite Challenges
The new orders index held steady at 66.7, indicating sustained demand, while the production index experienced a slight decline to 59.4 from 59.8 in August. Inventory levels reached cycle highs as companies stockpiled materials to mitigate supply chain disruptions.
Employment showed tentative signs of recovery, with the index rising to 50.2 after August's contraction. However, labor availability continues to challenge manufacturers, compounded by direct labor attrition and retirements.
Persistent Supply Chain Bottlenecks
The supplier deliveries index worsened to 73.4, reflecting lengthening lead times, while backlogs remained elevated at 64.8. Customer inventories plunged to 30.2, a historic low that suggests strong underlying demand.
Price pressures intensified, with the prices index climbing to 81.2 as manufacturers faced rising costs for raw materials, transportation, and labor. These inflationary pressures present ongoing challenges for maintaining profitability.
Industry Perspectives
Transportation equipment manufacturers cited labor availability as their primary challenge, followed by material shortages affecting plastic resins, polyurethane, specialty steel, and electronic components. Food producers expressed particular concern about labor shortages and across-the-board cost increases.
ISM Manufacturing Business Survey Committee Chair Timothy Fiore described the current environment as a "triple whammy" of extended lead times, intensifying shortages, and rising prices. He anticipates these supply chain constraints will persist through the first half of 2022.
Outlook
Fiore projects the PMI will remain in the 58-62 range through year-end, with potential improvements in supplier deliveries and employment by December. If current order strength continues with high backlogs and low customer inventories, production could potentially reach the mid-60s.
The September report underscores U.S. manufacturing's ability to maintain growth momentum despite significant headwinds. While challenges remain in supply chains, labor markets, and input costs, the sector continues to demonstrate remarkable adaptability and resilience.