March data indicated that the U.S. manufacturing sector remained on a solid growth footing, with output levels and new business volumes both rising sharply. The latest increase in new work was slower than in the previous month, but still the second-fastest since May 2010. Meanwhile, the rate of production growth was little-changed from the near three-year high recorded in February. Survey respondents commented on a combination of improving underlying demand and a catch-up effect following the weather-related slowdown seen earlier in the year.
Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI registered 55.5 in March, unchanged from the earlier ‘flash’ reading. The PMI was down from 57.1 in the previous month, but nonetheless at its second-highest level since January 2013. The main factor behind the drop in the headline index since February was the suppliers’ delivery times component, and to a lesser extent the moderation in new order growth from February’s recent high. Stocks of purchases had a slightly more positive influence on the headline PMI during March, while output and employment growth were little-changed over the month.
A strong overall increase in manufacturing production levels during March was mainly linked to stronger domestic demand. Overall levels of new work rose sharply, but new orders from abroad continued to expand at a only marginal pace. Higher new order volumes contributed to an accumulation of unfinished work for the second month running, but the latest rise in backlogs was slower than February’s survey-record high.
Manufacturing job creation was recorded for the ninth month running in March, with firms generally attributing the increase in employment to improving confidence about the economic outlook. Meanwhile, rising production requirements also led to a robust expansion of purchasing activity and a further increase in input stocks. There were signs that the worst of the weather-related squeeze on supply chains had started to ease in March, as vendor performance deteriorated at a much slower pace than in February.
Factory gate price inflation slowed for the third month running and was the weakest since September 2013. Meanwhile, input cost inflation was the second-weakest for nine months in March.
March data signalled that large manufacturers (more than 500 employees) were by far the best performing of the three company size categories monitored by the survey. Large manufacturers were also the only company size group to record faster expansions of output and new business than one month previously. Output growth was broad-based across the three market groups monitored by the survey. Intermediate goods producers posted the steepest rate of expansion, followed by consumer goods. In line with the trend for output, solid rates of job creation were recorded across all three market groups in March.
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