Modest US Manufacturing Expansion Continues in September
The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) was unchanged at 51.5 in September, indicating only a modest improvement in U.S. manufacturing business conditions. The preliminary ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, remained only fractionally higher than the
near three-year low recorded in June.
PMI index readings above 50.0 signal an increase or improvement on the prior month, while readings below 50.0 indicate a decrease. The PMI averaged 51.5 in the three months to September, down from 54.2 in the three months to June, pointing to the weakest quarterly performance since Q3 2009.
Manufacturers reported a further rise in output during September, though growth was only marginal and the weakest for three years.
The volume of new orders received by manufacturers increased on a month-on-month basis in September. Incoming new work has increased in each month since September 2009, with the latest rise the strongest in three months.
However, the increase in total new work intakes masked the steepest reduction in new export orders since October 2011.
Manufacturing employment increased for the thirty-second consecutive month in September. Additional staff were hired by companies in response to greater client demand. However, despite having strengthened slightly since August, the rate of job creation was only modest overall.
Input costs faced by manufacturers increased for the second month running, with panellists particularly mentioning higher prices for energy, resins and rubber. The rate of inflation was the fastest since May, but notably weaker than the highs seen at the start of 2012.
Firms raised their average selling prices to pass on the increase in costs. Although the increase in output charges was only modest, it was the first for four months.
Reflective of the weaker expansion for output, input buying increased only marginally and stocks of purchases were depleted for the second month running. Stocks of finished goods also fell, dropping at the fastest rate since February, and backlogs of work likewise fell. Suppliers’ delivery times lengthened further, but the latest increase in lead times was the second-weakest since June 2009, highlighting weak demand in manufacturing supply chains.
Chris Williamson, Chief Economist at Markit said: “With output growing at the slowest pace since the recovery began in October 2009, the manufacturing sector may have even acted as a slight drag on the economy in the third quarter. Gross domestic product therefore looks likely to have expanded at a much weaker pace than the 1.7% annualised rate seen in the second quarter, slipping closer towards stagnation.
“The slowdown has been accompanied by an ongoing reluctance to take on more staff compared to earlier in the year. Although some improvement was seen in the employment measure, the survey is consistent with official data showing another drop in manufacturing payroll numbers in September following the 15,000 decline seen in August.
“The principal cause of weakness remains the export market, with new export orders falling for the fourth successive month, and at an advanced rate of decline, reflecting the economic downturn in the Eurozone and slower growth in previously strong markets such as China and Japan.
“Alongside the worrying weakness of output and employment, the survey also showed price pressures to have risen markedly, with high oil prices in particular driving up input costs at manufacturers. Rising costs in turn fed through to higher selling prices and add to risk that consumer price inflation could pick up again in September.”