US Factory Growth Slightly Higher than Expected: Markit

The IHS Markit US Manufacturing PMI edged up to 55.5 in July of 2018 from 55.4 in June and above market expectations of 55.4, flash estimates showed. The reading pointed to a slightly stronger growth of the manufacturing sector amid a robust rise in new orders and a solid upturn in both production volumes and employment.

The overall improvement in manufacturing performance was underpinned by solid growth in domestic demand, which helped to offset another slight fall in export sales. Although only marginal, the latest drop in new work from abroad was the greatest seen since May 2016. Inventory building continued in July, with some manufacturers seeking to boost their stocks of raw materials in response to stretched supply chains. The latest lengthening of vendor lead-times was the greatest seen in more than 11 years of data collection. Survey respondents widely commented on low stocks among suppliers and capacity constraints across the freight industry.

On the inflation front, latest data revealed another sharp rise in average cost burdens, which manufacturers overwhelmingly attributed to higher raw material prices. There were widespread reports that tariffs on steel and aluminium had pushed up input costs in July. Robust client demand and efforts to protect margins resulted in the strongest rate of factory gate price inflation since May 2011. Despite concerns about higher input costs and tight labour market conditions, manufacturing companies remained upbeat about the year-ahead business outlook. 

The degree of positive sentiment picked up since June and remained comfortably above that seen on average in 2017, which partly reflected optimism regarding the outlook for domestic economic conditions. 

US Factory Growth Slightly Higher than Expected: Markit

Markit | Joana Taborda |
7/24/2018 1:59:23 PM