The pace of growth in southeastern Wisconsin's manufacturing sector slowed in October as companies dealt with changing material prices, rising shipping costs and product and labor shortages, according to the latest Marquette-ISM Report on Manufacturing.
The report’s Milwaukee-area PMI dropped from 58.66 in September to 55.9 in October. The decline is the first decrease in the index since July, but it remains above 50, the threshold that suggests the sector is growing. The index had climbed into the mid-60s in the fist half of the year, but with the October data included, the six-month average has now dipped to 59.5.
Respondents to the survey behind the data cited a number of issues in the region’s manufacturing sector, including frequent changes in raw material prices, increasing shipping costs and difficulty tracking material and problems with lead times.
Labor shortages were also cited as an issue. The report’s employment indices showed a sharp drop from September to October. The blue collar employment index declined from 55.7 to 41.1 and the white collar employment index declined from 53 to 38.4.
Respondents cited a shortage of skilled labor in particular and noted small businesses cannot hire enough employees because of higher wages.
Elsewhere in the report, the new orders index showed strong improvement, climbing from 49.6 to 64.9. Production was nearly flat, dipping 0.4 to 50.7. Inventories shrank, with the index dropping from 44.9 to 33.4 and customer inventories declined from 25 to 21.4.
The prices index continued to climb, increasing 7.7 to 97.2, and order backlogs increased by almost 3 points to 76.5.
The six-month outlook on business conditions was slightly worse in October, dropping to 47.1% from 55.3% in September. The index tries to balance positive and negative bias. The number of respondents expecting improved conditions dropped from 31.6% to 23.5% while the number of respondents expecting things to get worse climbed from 21.1% to 29.4%.
In October, 47.1% of respondents expected conditions to remain the same, nearly flat compared to September.
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