US Factory Activity Growth Accelerates in January

The flash Markit US Manufacturing PMI came in at 52.7 in January of 2016 from 51.2 in the previous month and better than market expectations. Output and new business increased at a faster rate while job creation eased to a 4-month low.
Markit | Joana Taborda | 1/22/2016 2:59:34 PM
January data signalled a solid upturn in production volumes, with the rate of growth accelerating for the first time since last October. Moreover, the pace of expansion was comfortably above the 26-month low recorded in December. Survey respondents mainly commented on higher output levels in response to positive new business trends and expectations of improving domestic demand over the months ahead.

Volumes of new work strengthened in January, after coming close to stagnation at the end of 2015. The latest increase in new orders was the fastest for three months. However, new export sales continued to rise at only a marginal pace, which manufacturers generally linked to the strong dollar.
Companies that reported an overall upturn in new work mostly cited improving domestic economic conditions. The main exception to the wider trend was among manufacturers facing cutbacks in new orders from clients in the oil and gas sector.

The rebound in total new business growth during January contributed to a stabilisation in backlogs of work and an upturn in input buying across the goods-producting sector. However, manufacturers remained cautious about their inventory volumes at the start of 2016, with both finished goods and preproduction stocks falling slightly over the month.

Meanwhile, manufacturers indicated a slight slowdown in job creation across the sector in January. The latest rise in payroll numbers was the weakest since September 2015. Anecdotal evidence suggested that softer overall employment growth reflected a wait-and-see approach to staff recruitment at the start of the year and, in some cases, the need to focus on efforts to reduce costs. 

January data signalled a slight reduction in manufacturers’ average cost burdens, which extended the current period of decline to five months. Survey respondents widely commented on lower commodity prices, especially oil and metals.

At the same time, factory gate price inflation remained only marginal and below the long-run survey average. Manufacturers noted that competitive pressures and lower input prices had resulted in subdued output charge inflation at the
start of 2016.

US Factory Activity Growth Accelerates in January