In the second quarter NAM Manufacturers’ Outlook Survey , 90.1% of respondents felt either somewhat or very positive about their company outlook, rising for the fourth straight quarter and the best reading in nearly three years. Respondents are predicting the highest levels of production, sales and job growth in Outlook Survey history. Three-quarters of manufacturers expect revenues will be back to pre-pandemic levels by the end of 2021.
Rising raw material costs once again topped the list of primary business challenges in the second quarter, with record paces expected for input costs and product prices over the next 12 months. In addition to rising costs, other top worries in the second quarter include the inability to attract and retain a quality workforce, supply chain challenges, transportation and logistics costs and rising health care and insurance costs.
Manufacturing employment rose by 15,000 in June, and in the first half of the year, the sector added 87,000 employees. There remained 481,000 fewer manufacturing employees relative to pre-pandemic levels. Nonfarm payroll employment rose by 850,000 workers in June, buoyed by the reopening of the economy, especially in leisure and hospitality. Yet, the unemployment rate inched up from 5.8% in May to 5.9% in June. With the labor market tight, the average hourly earnings of production and nonsupervisory workers in manufacturing rose to $23.75 in June, up a whopping 5.0% year-over-year.
Initial unemployment claims fell to 364,000 for the week ending June 26, a post-pandemic low.
The ISM® Manufacturing Purchasing Managers’ Index® edged down 61.2 in May to 60.6 in June, but it was the sixth time in the past seven months that the headline index exceeded 60, signaling very strong growth. Prices soared at the fastest rate since July 1979, and survey respondents continued to cite widespread supply chain challenges. Similar trends were observed in the report from the Dallas Federal Reserve Bank.
New orders for manufactured goods rose 1.7% in May, rebounding from the 0.1% decline seen in April. Overall, the manufacturing sector continues to expand strongly despite lingering supply chain and pricing pressures, with new orders increasing 7.1% since February 2020, or 9.1% with transportation equipment excluded. Core capital goods spending and shipments increased to record levels.