Weak US Manufacturing Growth Trend Is On
The final Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) signalled only a modest improvement in U.S. manufacturing business conditions.
Mark Wingham, Economist at Markit said: “The overall expansion of the U.S. manufacturing sector remained only modest in August, with the final PMI reading barely any higher than the near-three year low reported in July.”
The PMI posted 51.5 in August, down from the earlier flash estimate of 51.9. PMI index readings above 50.0 signal an increase or improvement on the prior month, while readings below 50.0 indicate a decrease. Although the PMI was up slightly from 51.4 in July, it was one of the lowest readings since the manufacturing recovery was first indicated in October 2009.
Wingham cautioned that “if the PMI does not pick up substantially in September, third quarter manufacturing growth will likely be one of the weakest since the recovery began.”
Wingham added: “U.S. manufacturers took a more cautious approach towards hiring more staff in August, with the rate of job creation the slowest since December 2010. This partly reflected the weak trends in output and new orders, despite having improved slightly from July.”
A further month-on-month increase in manufacturing output was signalled by August survey data. Despite the rate of growth having quickened slightly from July, the expansion was only modest and the second-slowest in over a year.
Incoming new work at U.S. manufacturers also increased in August, with one in every five panellists reporting larger volumes of new orders compared with July. The rise in total new orders largely reflected greater domestic demand, as new export work fell for the third consecutive month. Overall, the increase in new work intakes was stronger than that registered one month previously, but weaker than that estimated by the flash data.
New orders increased in all three market groups during the latest survey period. Producers of consumer goods posted the strongest rise in new work, while the weakest increase was reported by manufacturers of intermediate goods.
Reflective of the rise in new work, the quantity of inputs bought by manufacturing firms increased in
August. However, purchases rose at the weakest pace in 19 months. Input inventories meanwhile were depleted, albeit only marginally. Concurrently, panellists reported the smallest increase in suppliers’ delivery times in the current 38-month sequence of lengthening.
Although manufacturing employment has increased in each month since February 2010, the latest rise in staffing levels was only moderate and the weakest in 20 months. The slower rate of job creation was largely focussed on weaker employment growth in the consumer goods market group.
In contrast to the price reductions reported in each of the past two months, input costs faced by U.S. manufacturers were broadly unchanged in August. Some companies mentioned higher energy prices. Average selling prices charged by manufacturing companies in the U.S. meanwhile fell for the third consecutive month in August.
However, the latest reduction in output prices was only modest and the weakest in the current sequence of decreases.
The overall manufacturing expansion was led by large-sized companies in August, as has typically been the case throughout 2012 so far. The rate of output growth reported by larger manufacturers (those that have more than 500 employees) was the strongest since April, with a robust increase also posted for new orders.
Moreover, large firms were the only size category to report export growth in August. Weaker manufacturing expansions were reported by small and medium-sized firms. While both size categories posted an increase in new orders during August, small manufacturers (firms with less than 100 in headcounts) reported the first reduction in output since January.