U.S. manufacturers indicated a further rebound in business conditions at the end of the second quarter, driven by the fastest expansions of output and new orders for over four years. Stronger client demand in turn spurred an upturn in payroll numbers and a robust rise in purchasing activity across the sector. Meanwhile, input cost inflation hit a five-month high and supplier lead-times lengthened to the greatest degree since the weather-related disruptions seen at the start of the year.
At 57.3 in June, up from 56.4 in May, the final seasonally adjusted Manufacturing PMI was the highest since May 2010 and signalled a strong improvement in overall business conditions. The average PMI reading in the second quarter of 2014 (56.4) was the strongest recorded for four years.
June data indicated that output growth accelerated for the third month running, supported by a steep rise in new business volumes. The latest expansion of overall new work was much sharper than that seen in May, despite new export order growth easing to a five-month low. A number of survey respondents commented on improved demand from domestic clients in line with stronger underlying economic conditions.
Stocks of purchases also decreased in June, with survey respondents mostly linking reduced inventories to stronger than expected sales volumes. Increased production levels resulted in a robust rise in input buying during June, alongside a further expansion of workforce numbers. The latest upturn in manufacturing employment was the fastest for four months.
Stronger demand for raw materials contributed rising input prices and the sharpest deterioration in supplier performance since February. The latest increase in average cost burdens was the most marked since the start of the year.
Meanwhile, manufacturers signalled a moderate increase in factory gate charges, with the pace of inflation picking up from May’s 21-month low. Higher output prices have been recorded since September 2012, driven by sustained rises in input costs.
Medium-sized manufacturers (100- 499 employees) saw the strongest improvement in business conditions during June, while small-sized manufacturers (1-99 employees) recorded the least marked upturn in overall operating conditions.
All three market groups registered an improvement in business conditions in June, led by intermediate goods producers. Solid rates of job creation continued in June. Investment goods producers recorded the sharpest increase in payroll numbers during the latest survey period.