At 57.1 in February, up from 53.7 in January, the final seasonally adjusted U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled the strongest improvement in business conditions for 45 months. The headline index was much higher than the three-month low posted in January, and indicated a robust overall manufacturing sector performance. The earlier ‘flash’ reading for February was 56.7
February survey data signalled a strong upturn in manufacturing business conditions, following a weather-related slowdown during the previous month. Output and new business both picked up sharply as manufacturers started to overcome disruptions due to unusually bad weather, which in turn led to a solid rate of employment growth.
However, there were still strains on supply chains, with delivery times for inputs lengthening to the greatest degree since August 2008. As a result, some manufacturers have responded to recent weather disruptions by building up safety stocks, which was highlighted by the first increase in pre-production inventory levels since June 2013.
Volumes of new work increased at the sharpest rate since April 2010, which survey respondents mainly linked to rising domestic demand and strong confidence about the economic outlook among their clients. New export orders also increased and, although only marginal, the rate of expansion was the most marked since August 2013. Higher levels of incoming new business led to the steepest increase in manufacturing production since March 2011. Some manufacturers noted that unusually bad weather had a less disruptive impact on production growth than in the previous month, in part due to efforts to build up inventories of critical inputs at their plants.
Job creation was the strongest since March 2013, but this could not prevent a robust increase in backlogs at manufacturing firms. In a further sign of pressures on capacity, latest data indicated that stocks of finished goods fell for the eighth month in a row.
Meanwhile, manufacturers signalled a slower pace of input cost inflation during February, with the latest rise in input prices the weakest since June 2013. As a result, factory gate price inflation also eased further during the latest survey period.
February data signalled that large manufacturers (more than 500 employees) were the best performing of the three company size categories monitored by the survey. All company size groups recorded a sharper rate of new business growth in February, as well as rising levels of employment.
By market group, intermediate goods producers continued to register the strongest improvement in overall business conditions, followed by investment goods producers. Intermediate goods producers also posted the sharpest rise in new orders and the steepest pace of job creation.
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