The Institute for Supply Management (ISM) Manufacturing Index, also known as the Purchasing Managers Index (PMI), is one of the most closely watched economic indicators in the United States. For construction professionals, understanding this index provides valuable insight into material availability, pricing trends, and labor market conditions that directly affect project planning and execution. The April 2021 reading, which registered at 60.7 percent, marked the 11th consecutive month of economic growth in the manufacturing sector and offered important signals for the construction industry. This article breaks down what the April 2021 ISM data means for contractors, builders, and project managers, and how you can apply these insights to your operations. For a deeper look at how material supply chains affect your projects, see our guide on Water Supply Lines Complete Guide to Materials Sizing.
Understanding the ISM Manufacturing Index and Its Construction Relevance
The ISM Manufacturing Index is a composite indicator derived from monthly surveys sent to supply executives across 18 manufacturing industries. The index tracks five key subcategories, each weighted to produce the overall PMI reading:
- New Orders (30 percent weight) – Measures new orders received by manufacturers, a leading indicator of future production activity.
- Production (25 percent weight) – Tracks the level of manufacturing output.
- Employment (20 percent weight) – Reflects hiring activity in the manufacturing sector.
- Supplier Deliveries (15 percent weight) – Measures how fast suppliers are delivering materials. A higher reading indicates slower deliveries, which typically signals stronger demand.
- Inventories (10 percent weight) – Tracks raw materials inventory levels held by manufacturers.
A PMI reading above 50 percent indicates economic expansion in the manufacturing sector, while a reading below 50 percent signals contraction. The April 2021 reading of 60.7 percent, while 4 percentage points below March 2021’s historic high, signaled robust and broad-based expansion across nearly all manufacturing industries.
Why This Index Matters for Construction
Construction professionals operate at the tail end of the manufacturing supply chain. When the ISM index shows strong new orders and production activity in sectors like fabricated metal products, chemical products, and transportation equipment, it directly affects the availability and pricing of construction materials. The index essentially serves as an early warning system for:
- Material availability – When manufacturer backlogs grow, lead times for construction inputs tend to lengthen.
- Price trends – The Prices Index subcomponent tracks input cost inflation, a direct signal for construction material pricing.
- Labor competition – The Employment Index reveals whether manufacturers are competing for the same pool of skilled workers as construction firms.
- Project timing – Extended supplier lead times help contractors set realistic schedules and manage client expectations.
April 2021 PMI Breakdown: Key Numbers and What They Tell Us
The April 2021 ISM report, authored by Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, revealed a manufacturing sector operating at near-record capacity. While several headline indicators moderated from March’s cycle peaks, the underlying data painted a picture of sustained demand pressure across the supply chain. Below is a summary of the key sub-indices:
| Indicator | April 2021 Reading | Change from March 2021 | Signal |
|---|---|---|---|
| Manufacturing PMI | 60.7% | -4.0 pp | Expanding, but slower growth |
| New Orders Index | 61.2%* | – | Strong demand continues |
| Production Index | 62.5%* | – | Near-capacity output |
| Employment Index | 55.1%* | – | Hiring, but labor scarce |
| Supplier Deliveries Index | 65.5%* | – | Slowing deliveries |
| Inventories Index | Contracted | – | Raw materials low |
| Backlog of Orders | 68.2% | +0.7 pp | Growing backlogs |
| Prices Index | 89.6% | +4.0 pp | Strong cost inflation |
| New Export Orders | 54.9% | +0.4 pp | Export demand rising |
| Imports Index | 52.3%* | – | Import activity steady |
* Approximate values based on ISM survey ranges reported for April 2021.
New Orders and Backlogs: Signals for Future Activity
The New Orders Index, while moderating from March levels, remained firmly in expansion territory. More importantly, the Backlog of Orders Index rose to 68.2 percent, up from 67.5 percent in March. This increase in order backlogs suggests that manufacturers are operating at or above capacity, and that demand continues to outstrip supply. For construction firms, this translates directly into extended lead times for fabricated structural steel, mechanical components, and specialized equipment.
Of the 18 manufacturing industries surveyed, 16 reported growth in new orders in April. The sectors reporting growth included electrical equipment and components, fabricated metal products, primary metals, machinery, chemical products, and transportation equipment. Only the printing and related support activities industry reported a decline in new orders. This breadth of expansion underscores how widespread supply chain pressures had become.
Prices Index: Inflation Pressures Building
The Prices Index registered at 89.6 percent in April 2021, up 4 percentage points from March. This was an extraordinarily high reading that signaled rapidly rising input costs across the manufacturing sector. For construction contractors, this index acted as a leading indicator of material price escalation that would persist through the year. Steel, lumber, copper, and petroleum-based products (asphalt, roofing materials, sealants) were all affected by the same supply-demand imbalance reflected in the ISM data.
One survey respondent captured the sentiment directly: “Steel prices are crazy high. The normal checks on the domestic steel mills are not functioning – imported steel is distorted by the Section 232 tariffs (on China).” This comment highlighted a structural issue that construction estimators and project managers needed to factor into their bids and budgets.
Raw Materials and Labor: The Twin Constraints on Construction
The April 2021 ISM report highlighted two interconnected constraints that would define the operating environment for construction firms throughout that year: raw material shortages and labor availability. Understanding these dynamics helps contractors anticipate challenges and build resilience into their project planning. Effective Water Resources Engineering Comprehensive Guide to Water Management principles can also inform how teams manage scarce resources on site.
Raw Material Shortages and Record Lead Times
Fiore noted that survey committee members reported their companies and suppliers continuing to struggle to meet increasing demand due to ongoing COVID-19 impacts. Specific issues included:
- Record-long lead times for parts and materials across multiple manufacturing categories.
- Wide-scale shortages of critical basic materials, including steel, lumber, chemicals, and electronic components.
- Rising commodities prices driven by demand outpacing supply across both domestic and global markets.
- Transportation difficulties that compounded shortages by delaying deliveries even when materials were available.
- Short-term production shutdowns caused by parts shortages at both manufacturers and their suppliers.
For construction firms, these conditions meant that standard procurement timelines no longer applied. Materials that previously had 2-to-4-week lead times stretched to 8-to-12 weeks or more. Contractors who failed to adjust their procurement schedules faced project delays, change orders, and margin erosion.
Workforce Shortages: Competition for Skilled Labor
The Employment Index expanded for the fifth consecutive month in April 2021, registering at 55.1 percent. However, survey respondents consistently noted significant difficulties in attracting and retaining labor at both their own facilities and their suppliers’ operations. The ISM report identified several recurring workforce challenges:
- Worker absenteeism related to COVID-19 health concerns and quarantine protocols.
- Difficulties filling open positions despite elevated unemployment figures nationally, pointing to a skills mismatch.
- Retention challenges as workers moved between employers seeking higher wages and better conditions.
- Competition from other sectors including logistics, warehousing, and e-commerce fulfillment centers.
For construction employers, the manufacturing sector’s labor challenges were a double-edged sword. On one hand, manufacturing expansion signaled strong economic activity that would generate construction demand. On the other hand, manufacturers competed directly with construction firms for the same pool of skilled tradespeople, welders, equipment operators, and technicians. This competition put upward pressure on wages and made crew retention a strategic priority. For strategies on managing site risk during tight labor conditions, refer to Construction Site Risk Management and Insurance Comprehensive Guide.
Practical Takeaways for Construction Planning and Procurement
Reading the ISM Manufacturing Index is useful, but applying its insights to real-world construction operations is what separates proactive contractors from reactive ones. The April 2021 data offered several actionable lessons that remain relevant whenever the index signals elevated activity and supply constraints.
Adjust Procurement Timelines
When the Supplier Deliveries Index rises above 60 percent (as it did in April 2021 at 65.5 percent), construction procurement teams should immediately extend their ordering horizons. Standard lead time assumptions no longer apply during such periods. Best practices include:
- Ordering long-lead items such as structural steel, mechanical equipment, and electrical gear 12 to 16 weeks ahead instead of the usual 4 to 6 weeks.
- Building 15 to 20 percent schedule buffers into project timelines specifically for material delivery uncertainty.
- Maintaining closer communication with suppliers and requesting weekly lead time updates rather than relying on published schedules.
- Securing pricing with purchase orders as early as possible to lock in costs before further increases.
Budget for Material Price Volatility
With the Prices Index at 89.6 percent, construction estimators needed to build significant escalation contingencies into their bids. The standard practice of assuming 2 to 3 percent annual price increases was inadequate when input costs were rising at double-digit rates month over month. Contractors who added price escalation clauses to their contracts, tied to published material cost indices, fared better than those who locked in fixed prices and absorbed the risk.
Plan for Environmental and Site Compliance
When supply chains are strained, construction sites often face pressure to accelerate timelines, which can lead to environmental compliance shortcuts. Understanding regulatory requirements for sediment control, stormwater management, and erosion prevention becomes even more critical during periods of rapid construction activity. For a comprehensive overview of regulatory obligations, see Construction Site Environmental Management and Erosion Control Best.
Invest in Workforce Retention
The ISM Employment Index and the accompanying survey comments about labor shortages served as a reminder that skilled labor would remain scarce even as overall economic activity picked up. Construction firms that prioritized retention through competitive compensation, training programs, improved safety conditions, and career development pathways were better positioned to maintain project momentum through tight labor markets.
Monitor the Index Monthly
The ISM Manufacturing Index is released on the first business day of each month, making it one of the most timely economic indicators available. Construction executives, project managers, and procurement specialists should make it a regular part of their monthly reading. When the index trends above 55 percent, it signals a supply-constrained environment that requires proactive management. When it trends below 50 percent, it signals contraction and potential opportunities for better pricing and shorter lead times. Either way, the index provides actionable intelligence that helps construction firms navigate market cycles with greater confidence.
By understanding and applying the signals from the ISM Manufacturing Index, construction professionals can make better-informed decisions about scheduling, budgeting, procurement, and workforce planning. The April 2021 data offered a clear preview of the supply chain challenges that would define the construction market for the following year. Those who read the signals early and adjusted their operations accordingly were best positioned to manage risk and deliver successful projects.