Manufacturing PMI® at 59.3%, Showing Strength in the Face of an Ongoing Pandemic
After an almost imperceptible contraction from August to September, the manufacturing economy has gained ground again in October, showing strength in the face of a pandemic. Registering a Manufacturing PMI® of 59.3% in the October 2020 Manufacturing ISM® Report On Business®, manufacturing is at its highest point since September 2018 (59.3%). And although it seems like an impossibility, the data powering manufacturing metrics shows strength in the face of monumental adversity.
Increases across the board
All but one of the individual metrics contributing to the manufacturing PMI are up in October, solidifying a 4- to 5-month trend that’s reaching new highs as the year progresses. The biggest driver of the 3.9-point increase to the overall PMI was a 7.7-point uptick in new orders: a clear sign that the economy continues to restabilize after COVID-19 disruptions.
Production also is up in October (2 points), alongside employment (3.6 points) and deliveries (1.5 points). Imports and exports are showing signs of strength as well, up 4.1 and 1.4 points respectively. The heavy activity has driven prices higher, up 2.7 points this past month.
All together, these metrics signal not only strength, but also stability. According to the report, “five (Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; and Transportation Equipment) of the big six industry sectors continue to expand.”
Sentiment is running high
Industry executives have echoed the optimism shown in the data. According to respondents:
“Business continues to be robust. Sales are greater than expectations, and cost pressures are modest. There is posturing by suppliers on market price increases for corrugated and polypropylene, yet no firm price increases at this time. We expect a strong finish to 2020 and a solid start in 2021.” (Chemical Products)
“October order books are the strongest we have seen in the past six months.” (Paper Products)
With a holiday season that’s certain to buoy this momentum and post-election optimism headed into 2021, manufacturing appears on-track for positive growth in the coming year, despite the historic downturn faced in early 2020. Other factors like growing lead times and strong ordering show a willingness of producers to look long-term, past the pandemic. Manufacturing has decided to rebound, regardless of vaccine prospects.
Manufacturing props itself up
There’s plenty of reasons to trust manufacturing’s rebound and strong growth prospects. Emerging data shows manufacturing has weathered COVID-19 with very little dependency on government stimulus, meaning the its gains are all its own. Moreover, the emphasis on domestic manufacturing from both presidential candidates shows intent to bolster this sector in the coming four years — we’re now facing the prospect of President Elect Joe Biden’s Made in America plan, which emphasizes reshoring.
The pandemic, while disruptive and ongoing, is being edged out by manufacturing’s resilience. Over the past four months, manufacturing has proven that it’s not only an essential industry — it’s a vital one, capable of weathering historic adversity and rebounding to new heights. We can expect manufacturing’s resurgence to continue into 2021.