A few key highlights from the ISM’s October Purchasing Managers Survey:

“Business Survey Committee panelists reported that their companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand. All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.

Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential.

However, panel sentiment remains strongly optimistic, with four positive growth comments for every cautious comment.”

So, same challenges related to virtually all manner of inputs, but, nevertheless, strong optimism over the future — as the following with regard to demand would dictate: 

“Demand expanded, with the (1) New Orders Index growing, supported by continued expansion of the New Export Orders Index, (2) Customers’ Inventories Index remaining at very low levels, and (3) Backlog of Orders Index staying at a very high level.

Consumption (measured by the Production and Employment indexes) grew during the period, with a combined 1.7-percentage point increase to the Manufacturing PMI® calculation.”

In the face of no serious light yet at the end of the hiring tunnel: 

“Although the Employment Index expanded for a second month, hiring difficulties at panelists’ companies show no significant signs of abating.”

It’s always interesting to read the report’s featured respondents’ comments:

“Global supply chain issues continue. Getting anything from China is near impossible — extreme delays. Microchip and circuit breaker shortages continue and are expected to continue into 2022.” [Computer & Electronic Products]

 “Business is getting stronger, but the supply chain is getting worse every day.” [Chemical Products]

“Strong sales continue; however, we have diverted chips (semiconductors) to our higher-margin vehicles and stopped or limited the lower-margin vehicle production schedules.” [Transportation Equipment] 

“Import costs and delays hurting business, requiring more safety stock for uncertainty. Rolling blackouts in China starting to hurt shipments even more.” [Food, Beverage & Tobacco Products]

“Domestic original equipment manufacturer (OEM) capital-expenditure spending is trending up for our business. We are seeing an increase of capital equipment with life spans of more than 10 years in the fourth quarter.” [Fabricated Metal Products]

“Demand continues to be strong, but we continue to be held back by supply chain issues — logistics delays, as well as capacity and labor issues at suppliers.” [Electrical Equipment, Appliances & Components]

“Business remains strong, with brisk incoming orders. We have become much more supply driven versus demand driven, due to shortages of labor, materials and freight. Costs continue to increase on all fronts, and we are considering our third price increase of the year for our customers.” [Furniture & Related Products]

“Customer demand remains high. COVID-19 related supply chain issues still hamper our ability to meet demand. Labor is still difficult for our suppliers to obtain, and labor costs are rising.” [Machinery]

“Demand for our products remains strong, but we continue to struggle to secure enough raw material to keep our manufacturing lines running.” [Miscellaneous Manufacturing]

“My prediction is that 2022 will be very similar to 2021 — similar demand, constrained supply, restricted logistics and rampant inflation.” [Plastics & Rubber Products]

While bottlenecks will ultimately abate, general conditions continue to evolve in a manner that, in our view, has odds further favoring the structural inflation narrative going forward.