The final Markit US Manufacturing PMI came in at 50.7 in May of 2016, slightly up from 50.5 in the preliminary estimate but down from 50.8 in the previous month. It is the lowest figure since September of 2009 as output fell for the first time in more than 6-1/2-years, new work expanded at the slowest pace since December last year while job growth picked up and input cost inflation accelerated to a nine-month high.
Lower production levels were the main downward influence on the headline PMI in May. Although only marginal, this was the first overall reduction in manufacturing output recorded by the survey for more than six-and-a-half years. Anecdotal evidence suggested that softer new order growth and efforts to rein in inventory accumulation had exerted negative influences on production schedules.
The latest survey highlighted only a modest increase in new business intakes, with the pace of expansion easing to a five-month low. Manufacturers cited a range of factors acting to dampen client spending, including weak capital investment across the energy sector, uncertainty related to the presidential election and generally subdued economic conditions. Added to this, a marginal drop in export sales also weighed on overall new business growth in May.
A slower upturn in new orders enabled another reduction in backlogs of work during May. Despite little sign of pressure on operating capacity, the latest survey signalled a marginal rise in payroll numbers and the rate of jobs growth picked up slightly from April’s near three-year low. Additional staff hiring was linked to new product launches and longer-term expansion plans.
Manufacturers continued to report cautious inventory strategies during May, leading to a fall in stocks of purchases for the sixth month running. Postproduction inventories rose slightly, but this was partly linked to weaker than expected sales.
Input cost inflation remained modest in comparison to its post-crisis trend, despite accelerating to the fastest since August 2015. There were widespread reports citing higher steel prices in May. At the same time, factory gate charges were broadly unchanged, which ended a three-month period of price discounting.
6/1/2016 2:59:18 PM