Are the (Really) Tough Times Finally Behind Us?  

Manufacturers could use some good news these days after two years spent fighting supply chain disruption, dealing with labor shortages and battling inflation.

And it looks like there might finally be light at the end of the tunnel for this besieged industry, according to the latest Manufacturing ISM Report on Business, which tracks data compiled from purchasing and supply executives at over 400 industrial companies.

The August report indicated that some of the recent pressures may finally be easing up and the sector is stabilizing.

“It’s not gaining or losing elevation,” Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee told a conference call of reporters. “It’s running at a decent clip. […] Three straight months of similar expansion says that things are very steady.”

The ISM manufacturing index is considered a key indicator of the state of the U.S. economy and the August report found that five out of six of the biggest manufacturing industries - Petroleum & Coal Products; Transportation Equipment; Computer & Electronic Products; Machinery; and Food, Beverage & Tobacco Products — reported moderate-to-strong growth last month.  

Meanwhile, the Prices Index decreased by over 7 percentage points (52.5 percent in August versus 60 percent in July) in a month to its lowest level since June 2020 suggesting that the inflationary pressures we’ve seen of late may be diminishing.

Even the ongoing labor shortage may be taking a moment to pause and collect its breath as companies reported lower quit rates. The Employment Index expanded in August to 54.2 percent, as companies continued to hire at strong rates, with fewer layoffs and hiring freezes.

 “With prices backing off, buyers are more inclined to jump into the market, and employment is finally gaining, meaning production should come back up,” Fiore said, quoted in an ISM news release about the report.

“There are some adjustments going on related to supply/demand balance, but I think (the sector) has set a smooth path. I feel really good about where things are,” he added.

Market reaction to the report was muted with some expectation that the positive news in the manufacturing industry would lead to increased interest rates. In the meantime, manufacturers can take some solace in the fact that some of the pressures of recent years show signs of letting up.