ISM manufacturing PMI hits 55.5 as input prices keep rising

The news

The Institute for Supply Management’s manufacturing index rose to 55.5 in October from 54.5 in September, its 10th straight month of growth. Its prices index eased to 75.2 from 77.9, which still means input prices rose for a 25th month.

Production rose to 59.0, its highest reading since November 2021. But manufacturers remained concerned about inflation and supply constraints.
“The increase in negative sentiment is really all about the inflationary pressures and the constraint in availability of raw materials, made worse by the Iran war and trade wars,” Susan Spence, chair of ISM’s Manufacturing Business Survey Committee said.

The details

ISM tied the higher input prices to steel and aluminum, tariffs on imported goods and oil-based products hit by the Middle East conflict. Metals have the longest runs on ISM’s list of inputs rising in price.

Aluminum has appeared on the list for 35 months, though respondents also reported lower prices in October.
Copper has been listed for 16 months and steel for 12.
Freight and fuel have been listed for eight months. Diesel joined three months ago.

“Inflationary pressures and volatile commodity markets continue to create challenging scenarios,” said a respondent from the food, beverage and tobacco products industry.

Inputs reported up in price in October by consecutive months on ISM’s list, led by aluminum at 35, copper at 16 and steel at 12.

Supplier deliveries slowed for an 11th straight month. The Supplier Deliveries Index rose to 59.1 from 59.0. Twelve industries reported slower deliveries, led by electrical equipment, fabricated metals and computers and electronics.

A machinery respondent described worsening lead times and prices, saying some items still carry delays dating to the Covid-19 pandemic. “Four weeks is now 50 weeks,” the respondent said.

The same respondent said an item that cost $2,000 six months ago now costs $4,000.

Electronic components remained among the most frequently reported shortages. They have appeared on ISM’s short-supply list for 20 months, while electrical components have been listed for 16.

Memory has been in short supply for 10 months. Printed circuit boards, copper and steel have been listed for four.
Customers’ inventories held at 41.6, a level ISM reads as too low, for a 25th month.

Demand is holding up as well, which keeps factories hiring. New orders grew for a 10th consecutive month, with the index rising to 55.5 from 55.3.

Employment also remained in growth territory for a fourth month, although its index eased to 52.4 from 52.7.

Backlogs grew for a 10th month but slowed to 54.6 from 56.4.
Twelve manufacturing industries reported growth in October, while three reported contraction.

Worth noting

Manufacturers’ comments remained mostly negative despite the sector’s continued expansion. ISM counted 34% of comments as positive and 66% as negative, marking a third straight month of worsening sentiment.

S&P Global’s separate US manufacturing PMI fell to 54.9 in October from 55.9 in September.