US Manufactured Goods: Inflation ‘out of control’, has not peaked, but has ‘intensified’ amid strong demand, shortages and longer delivery times

“Stocking efforts” of inputs to counter price spikes and shortages. But inventories of finished goods continued to decline.

By Wolf Richter for WOLF STREET.

The two U.S. manufacturing PMIs released today – they’re based on manufacturing executives’ views of their own businesses compared to what they saw the previous month – painted a similar picture for April: relentless inflation , supply constraints and high demand.

And the storage of the pre-production materials they could reach survey highs to counter price spikes and shortages – a typical inflationary reaction, part of the inflationary mindset, which ends up worsening inflation and shortages.

The S&P Global US Manufacturing PMI for April.

Amid strong demand growth and expanding production, manufacturers reported that inflation in April “has accelerated” and inflationary pressures have shown “no signs of easing”, in amid “steeper increases in costs and selling prices”, and continued supplier shortages with delivery delays. suppliers still stretching, as suppliers grapple with “serious shortages of materials and capacity,” according to the US S&P Global Manufacturing PMI today (formerly Markit PMI).

“Consumer and business demand is proving to be encouragingly strong despite strong inflationary pressures, which intensified further in April,” the PMI report said.

“Input costs and selling price inflation rose, the latter accelerating at a near-record pace, as businesses grappled with rising energy prices, the continued rise in prices induced by suppliers amid tight supply chains and rising labor costs,” the PMI report said.

“The higher cost loads were attributed to higher material and supplier prices, including higher transportation, fuel and metal expenses,” the report said.

“Companies continued to pass on higher material and personnel costs to customers in April as the rate of fee inflation accelerated. The rise in selling prices was the fastest since last October.

And the building up of input stocks to counter price rises and shortages: “Along with a further upturn in new orders, companies have increased their purchases of inputs at a steady pace. Many companies said the increase in purchasing activity was linked to efforts to stockpile inputs amid price increases and material shortages,” the report said.

“As a result, pre-production inventories grew at the highest rate on record,” the report said. But inventories of finished goods “continued to contract”.

The ISM manufacturing report on April activities.

“The US manufacturing sector remains in a demand-driven and supply chain environment,” with five of the six largest manufacturing industries – machinery; computers and electronics; food and drinks; transportation equipment; and chemicals – recording moderate to strong growth in April, the ISM Manufacturing Business Report said today.

“In April, progress slowed in addressing labor shortage issues at all levels of the supply chain. Panelists reported higher quit rates compared to previous months, with fewer panelists reporting improvement in meeting headcount goals,” the report states.

“Panelists continue to rate supply chain and pricing issues as their top concerns,” the report said.

Prices rose again in April, at a slightly slower pace than in March, but surcharges rose again, according to the report.

“Inputs – expressed as supplier shipments, inventory and imports – continued to limit the expansion of production” as supplier shipments “slowed to a faster pace in April.”

Here’s what ISM respondents said about their own companies:

chemical manufacturer: “The Tier 2 supplier closures in Shanghai are having a ripple effect for our suppliers in other parts of China. Long delays at ports, including in the US, continue to pose supply challenges Inflation is out of control Fuel costs and hence freight costs drive the cycle higher At some point the economy has to give way it will be difficult to have real growth with a such pressure on costs.Despite the problems and the poor outlook, business remains dynamic.

Transport Equipment Manufacturer“Continued strong demand with improvements in the supply chain. Delays still exist, but supply issues are slowly improving. Cost increases in several categories.

machine manufacturer: “Incoming orders are still very strong. Unfortunately, the logistical problems have not yet improved, so the delays remain extended.

Manufacturer of fabricated metal products: “Due to electronic component supply chain issues, production has been lower than normal. Backlog is increasing due to supply chain issues. New order sales are stable, except that international orders are lower.

Electrical equipment, devices and components“Business is strong. Backlog continues to grow due to new orders and inconsistent supply chain conditions. Component shortages are the main factor limiting our production.

Miscellaneous Manufacturing: “The closures in China due to a new wave of COVID-19 are causing supply problems for the end of the second quarter and the beginning of the third quarter. We have extended delivery times to customers and are ordering products in China for cover demand until Q4 and early Q1 2023.”

Non-metallic mineral products“Overall, supply chain improvements are happening on larger scale items, but we’re seeing vendors selling low volume items to us struggling in some cases to get inventory from food and the raw materials they need. Freight also continues to plague matters.

Plastic and rubber products: “The activity is still very robust. Material price increases continue to be passed on (to customers) based on the costs of raw materials, logistics and labor to manufacture the products.

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