US Factory Activity at 16-Month Low

The Markit Flash U.S. Manufacturing PMI decreased for the second consecutive month to 53.8 in May from 54.1 in April as slower new order growth offset faster job creation. Is the smallest figure since January of 2014.

Latest data indicated that overall new business growth softened for the second month running and was the weakest since January 2014. Moreover, new export sales decreased marginally in May, with a number of manufacturers noting that the strong dollar had a negative influence on competitiveness in external markets. In terms of domestic demand, survey respondents noted that energy sector investment spending remained a key area of weakness in May.

Manufacturing output growth eased further from March’s six-month high, which firms largely attributed to softer new business gains. The latest increase in output volumes was the slowest recorded so far in 2015, but still broadly in line with the post-recession average.

Meanwhile, latest data signalled the slowest pace of backlog accumulation across the manufacturing sector for four months. Lower pressure on operating capacity was linked to a combination of weaker new business gains and robust job creation.

Higher levels of manufacturing employment have been recorded in each month since July 2013. The latest upturn in payroll numbers was the fastest for six months, which firms attributed to the launch of new products, long-term investment plans and efforts to boost production volumes.

Suppliers’ delivery times lengthened in May, although the latest deterioration in vendor performance was much less marked than February’s recent low. There were reports that some supplier bottlenecks have persisted after the port strikes earlier in 2015. However, the latest survey indicated the slowest rise in pre-production inventories for 11 months, suggesting a lower propensity among manufacturers to build safety stocks in May.

On the prices front, manufacturers indicated an increase in their average cost burdens for the first time since December 2014. That said, the rate of inflation was only marginal, with survey respondents noting that low oil prices continued to help reduce cost pressures, while a number of firms commented on falling steel prices.

Meanwhile, factory gate charges rose at the most marked pace for six months, but the rate of inflation remained subdued in comparison to the average seen since the survey began in 2007.

US Factory Activity at 16-Month Low

Markit | Joana Taborda |
5/21/2015 2:57:21 PM