Where’s the snow and frost that everybody talks about?
February data suggested a solid rebound in U.S. manufacturing business conditions following the slowdown recorded during the previous month. This was highlighted by a rise in the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™), which is based on approximately 85% of usual monthly replies, from 53.7 in January to 56.7 in February. The latest reading pointed to the fastest overall improvement in U.S. manufacturing business conditions since May 2010.
The upturn in the headline U.S. Manufacturing PMI was driven by sharp and accelerated increases in both production levels and incoming new work during February. Latest data indicated that output growth recovered strongly from January’s three-month low, suggesting manufacturers have started to shake off the disruptions caused by heavy snowfall and extreme weather conditions in parts of the U.S.
Moreover, new business volumes increased at the sharpest rate since May 2010, suggesting resilient underlying demand across the U.S. manufacturing sector. Higher levels of new work in February partly reflected a return to export sales growth following a slight reduction during the previous month.
Manufacturers indicated that positive job hiring trends continued in February, thereby extending the current period of employment growth across the sector to eight months. Latest data signalled a solid pace of job creation that was the joint-sharpest since March 2013. Survey respondents suggested that greater production requirements, confidence in the economic outlook and, in some cases, pressures on operating capacity had led to rising workforce numbers in February.
Higher levels of new business and some on-going disruptions from the extreme weather conditions this year contributed to a sharp increase in backlogs of work during February. The latest accumulation of work-in-hand in the manufacturing sector was the steepest since the survey began in May 2007.
Meanwhile, manufacturers pointed to a further marked reduction in their stocks of finished goods, largely reflecting strong underlying demand in February. Higher production requirements and efforts to guard against delays in the receipt of deliveries from suppliers contributed to a rise in stocks of inputs for the first time since June 2013. Latest data signalled that suppliers’ lead-times lengthened to the greatest degree recorded for five-and-a-half years, which survey respondents overwhelmingly linked to unusually bad weather conditions in 2014 to date.
February data signalled that input cost inflation eased for the second month running. The latest increase in input prices was the slowest since June 2013. Anecdotal evidence suggested higher prices for metals (especially steel and copper) were a key source of cost inflation in February. In line with slower overall cost inflation, latest data pointed to a weaker rise in manufacturers’ output charges. The rise in factory gate prices during February was the slowest since September 2013.