May 1, 2019   SOURCE: BusinessWire

IHS Markit US Manufacturing PMI™

U.S. manufacturing firms registered a moderate improvement in operating conditions in April. Expansions in output and new orders picked up from March's recent lows, with new business growth the fastest for three months. Despite a further rise in backlogs of work, the rate of job creation was the slowest since June 2017 and only moderate overall, in part reflecting skill shortages. Expectations towards the coming year were relatively subdued, down to the lowest seen so far this year. Meanwhile, inflationary pressures continued to soften for a sixth month running.

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 52.6, up slightly from March's recent low of 52.4. This signalled that the latest improvement in the health of the manufacturing sector was the second-slowest since June 2017.

Although faster than that seen in March, the latest upturn in production across the goods producing sector was among the softest seen in the last two years and below the series trend. Nonetheless, panellists linked the sustained rise in output to a further increase in new orders and efforts to clear backlogs.

New business growth also quickened from March's recent low in April. The expansion was the fastest for three months, albeit notably slower than the 2018 average. Anecdotal evidence suggested the rise in new orders was due to greater marketing activity and new product launches. Foreign client demand remained subdued, however. The marginal upturn in export sales was linked to the acquisition of new clients, but many highlighted global trade tensions and slowing foreign demand as factors dampening growth.

Although new business grew at a faster pace, the rate of job creation eased in April. The rise in payroll numbers was the softest since June 2017, in part because firms struggled to find staff and replace leavers. The slower jobs growth also reflected subdued confidence among manufacturers. Output expectations dipped to a four-month low , with panellists expressing concerns surrounding less robust demand conditions in 2019 so far.

Meanwhile, manufacturing firms registered a rise in backlogs in April. The rate of accumulation was the fastest since last November as new order growth outpaced the increase in output.

On the price front, input price inflation eased for the sixth successive month and signalled the slowest rise in cost burdens since July 2017. Subsequently, firms increased their factory gate charges at a softer pace.

Finally, both pre- and post-production inventories continued to rise in April. Manufacturing firms reportedly increased their stock holdings amid forecasts of further new order growth. At the same time, lead times for inputs lengthened to the smallest extent since June 2017 as purchasing activity increased only moderately.

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

"Although the PMI ticked higher in April, the survey remains consistent with manufacturing acting as a drag on the economy at the start of the second quarter, albeit with the rate of contraction easing. Historical comparisons indicate that the survey’s output gauge needs to rise above 53.5 to signal growth of factory production. As such, the data add to signs that the economy looks set to slow after the stronger than expected start to the year.

“Employment growth also disappointed as hiring slipped to the lowest for nearly two years, albeit in part due to firms reporting difficulties finding staff amid the current tight labour market.

“There was better news on the order book front, however, with inflows of new business rising and firms signalling an improved export performance. Unfortunately, on balance, manufacturers seem sceptical that the rise in demand will persist, with future expectations of output growth slumping lower in April.

“Both input cost and factory gate price inflation rates meanwhile eased further, down to the lowest for over one and a half years, hinting that consumer price inflation rates will have continued to cool in April.”

OUTPUT

U.S. manufacturing firms continued to register a rise in output in April, though the rate of expansion remained among the slowest over the last two years. Where an increase in production was reported, panellists linked this to greater new order book volumes and efforts to clear backlogs. At the company size level, large firms recorded the strongest increase in output.

NEW ORDERS

New business received by manufacturers increased further in April, with the rate of expansion picking up from March's recent low. Rising at the quickest rate since January, the upturn was supported by greater marketing activity and new product launches. Notably, the increase in new orders was slightly faster than the series trend.

NEW EXPORT ORDERS

Adjusted for seasonal factors, the New Export Orders Index signalled a further increase in foreign client demand in April. The rise in new export sales reportedly stemmed from the acquisition of new clients. That said, the rate of growth was slower than the series trend and marginal. At the company size level, the upturn was led by medium sized firms.

BACKLOGS OF WORK

Backlogs of work at U.S. goods producers increased in April, following broadly unchanged levels of unfinished business in March. Notably, the rate of accumulation was the quickest since last November and solid. Panellists attributed the rise to growth in new orders outstripping that of output.

STOCKS OF FINISHED GOODS

Goods producers registered a back-to-back monthly increase in post-production inventories in April. The modest upturn in stock levels was linked to efforts to build inventories in anticipation of further new business growth. At the company size level, only small firms registered a contraction in stocks of finished goods.

EMPLOYMENT

April data signalled a further increase in workforce numbers across the U.S. manufacturing sector. Anecdotal evidence suggested the rise was due to efforts to clear backlogs and greater production requirements. That said, the rate of job creation was the slowest since June 2017 and modest. Some respondents noting difficulties finding replacements for retirees and voluntary leavers.

OUTPUT PRICES

In line with a slower rise in input costs, manufacturing firms registered a softer increase in factory gate charges in April. Where higher charges were reported, panellists linked this to the pass-through of greater cost burdens to clients. That said, the modest rise in output prices was the slowest since September 2017.

INPUT PRICES

Average cost burdens faced by manufacturing firms increased at a softer pace in April. Though solid, the rise in input prices was the slowest since July 2017, with around 81% of firms registering no change in costs. At the company size level, medium sized firms recorded the fastest rise in purchase prices.

SUPPLIERS’ DELIVERY TIMES

The seasonally adjusted Suppliers' Delivery Times Index indicated a further deterioration in vendor performance across the U.S manufacturing sector in April. Longer lead times were linked to stock shortages and greater demand for raw materials. That said, delivery times lengthened to the smallest extent since June 2017.

QUANTITY OF PURCHASES

Purchasing activity across the manufacturing sector continued to increase in April, with the rate of growth accelerating from March's recent low. The upturn was attributed to a further rise in new orders and efforts to clear backlogs. That said, the pace of expansion remained one of the slowest in the last two years.

STOCKS OF PURCHASES

Pre-production inventories rose further in April, thereby extending the current sequence of growth that began in June 2017. Panellists stated that stock replenishment was linked to increased backlogs and forecasts of sustained new order growth.

FUTURE OUTPUT

Output expectations for the coming year remained historically subdued in April. Manufacturers registered the lowest degree of confidence in the year-to-date amid greater uncertainty and less robust demand conditions. Where optimism was reported, panellists linked this to new product development and hopes of further new business growth.

NOTE

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