Area manufacturing sector’s growth rate dips slightly in June

Last updated on July 30th, 2021 at 02:36 pm

The headline number in the latest Marquette-ISM Report on Manufacturing for June showed continued growth in southeastern Wisconsin’s manufacturing sector, albeit at a slightly slower pace than May.

The Milwaukee-area PMI for the report was 62.62 for June, down from 64.49 in May. A reading above 50 indicates the manufacturing sector is growing.

A total of 46.15% of survey respondents expressed confidence in business conditions going forward while an equal number of respondents felt business conditions will remain the same over the next six months.

The six-month business outlook diffusion index, which attempts to balance positive and negative bias, increased from 64.71% in May to 69.23% in June.

The shift was driven by an approximately 5 percentage point increase in survey respondents who expect business conditions to improve and a 4 percentage point decrease in those who expect business conditions to worsen. Survey respondents who expect the same conditions dropped compared to May by a little under a point.

The new orders index in the report for June increased by about 10 percentage points compared to May while the backlog of orders decreased by 14.5 percentage points in June compared to May.

Survey respondents are reporting challenges with fabrication lead times, the bullwhip effect and supply chain delays.

“Fabrication lead times continue to be at 8 weeks plus and electronic components are seeing a bullwhip effect occur due to confusion in purchasing and cancellations due to increased lead times after initial purchase,” one survey respondent said.

Another survey respondent expects worsening conditions throughout July and August with products sourced from India – 37,566 new coronavirus cases were confirmed in India, less than a tenth of what it was seeing at its peak in May, NPR reported Tuesday. Only 4% of India’s population is fully vaccinated and scientists expect another outbreak will hit the country in the fall, according to the report.

A third respondent reported building even greater safety stock than pre-pandemic due to forecasted supply interruptions. Meanwhile, a worker shortage to fill open roles for new orders to replace employees let go during the pandemic continues to be a challenge.

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