Manufacturers face price increases, shortages to start new year: PMI

Dive Brief:

Manufacturers are dealing with substantial price increases for input materials — from aluminum to wooden pallets — and are facing shortages in some areas, according to The Institute for Supply Management's January manufacturing report released Monday. It was the eighth straight month of price increases.
"We had zero of our companies report price decreases — zero," ISM Manufacturing Business Survey Committee Chair Timothy Fiore said on Monday. "And the month before then, December, we had 2.6% report lower prices."
ISM expects raw materials to increase 2.9% through 2021, according to its forecast for the year, Fiore said.

Dive Insight:

The price increases manufacturers face are cascading through the supply chain and beginning to show up for the end consumer, Fiore said.

"You see it now. You go to the grocery store, everything's more expensive. No matter where you go, pretty much everything's more expensive," he said.

But the promise of a vaccine and bringing the pandemic under control means suppliers could potentially bring in more employees to factories without having to worry about social distancing, which could increase productivity rates.

Right now, price increases don't appear to be slowing down manufacturing demand as new orders continued to increase while their customers' inventories continued to be reported as too low.

As prices continue their upward climb, manufacturers are still dealing with the two supply chain headwinds plaguing the industry throughout the pandemic: slowing supplier deliveries and labor availability.

"Huge logistics challenges, especially in getting product through ports and in getting containers," said one ISM survey respondent in the machinery industry. "We are seeing significant cost increases in logistics and raw materials."

Another respondent in the food, beverage and tobacco products space said labor availability was its main concern right now.

"They want the people, it's just they can't find them, that's the problem," Fiore said. "And you can't take a waitress or a bellboy and put them on a production line ... it's a different type of work."