US ISM: Not all good news – Wells Fargo

The ISM Manufacturing Index rose in September to 61.1, surpassing expectations. Analysts at Wells Fargo point out that the message from the ISM report is that supply chain issues have gone from a problem to a crisis as the the top drivers were longer wait times for supplier deliveries and sharply higher prices paid. 

Key Quotes: 

“The ISM manufacturing index, a closely watched barometer of activity in the manufacturing sector, rose in September to 61.1, signaling its fastest pace of expansion since May. While that was certainly better than the consensus had been expecting, it is not all good news when you examine the underlying components.”

“The largest overall increase among subcomponents was a 3.9 point pop in the supplier delivery index. This measure rises the longer that factories have to wait for supplies. Ordinarily a modest wait is consistent with a fast-growing economy. However, today it says more about the supply chain crisis.”

“The employment index rose to 50.2 in September suggesting expansion, but it has hovered around the 50-breakeven point for much of the past year as businesses struggle to find the help they need. The lack of labor and inputs is causing logistic problems and limiting the pace of production. It's also leading to significantly higher costs.”

“Price pressure continues to build and businesses are increasingly passing costs on to consumers.”

“Until we see a meaningful easing in the availability of labor and inputs, supply problems will keep pressure on prices.”