July data pointed to continued strong growth of production levels and incoming new business across the U.S. manufacturing sector, although the latest survey indicated some loss of momentum since the previous month. Employment growth also moderated during July, and was the weakest in the current 13-month period of workforce expansion. However, latest data signalled a robust rise in input buying and renewed efforts to boost pre-production inventories, which survey respondents attributed to sharp increases in overall new business volumes.
Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI registered 55.8 in July, down from a 49-month high of 57.3 in June. Although the latest reading was the lowest since April, the index remained well above the neutral 50.0 value and signalled a robust improvement in overall business conditions across the manufacturing sector.
Production volumes increased sharply in July, although the pace of expansion moderated after hitting its fastest for over four years in June. Higher levels of output were linked to improving domestic economic conditions and strong client demand.
In line with the trend for production, new business growth held close to its fastest for over four years, despite the pace of expansion slowing since June. Survey respondents mainly cited the launch of new products and greater spending among domestic clients. Meanwhile, latest data suggested that export sales continued to weigh on overall new business growth, with the latest rise only marginal and the slowest in the current six-month period of expansion.
Higher levels of new work contributed to a solid increase in outstanding business in July, although the rate of backlog accumulation slipped to a four-month low. Pressures on operating capacity contributed to another rise in payroll numbers. However, the latest increase in employment was the weakest for over a year, which some firms attributed to the non-replacement of voluntary leavers.
Meanwhile, input cost inflation eased for the first time since April and remained subdued in comparison to the average seen since the survey began. Factory gate charges nonetheless increased at a solid pace in July, with the latest rise the fastest seen in 2014 so far.
July data suggested that large manufacturers (500+ employees) saw the greatest moderation in output growth since the previous month. Small manufacturers (1-99 employees) bucked the wider trend and posted their strongest rise in production levels since April 2010. Meanwhile, medium-sized manufacturers (100- 499 employees) were the best performing in terms of jobs growth during the latest survey period.
All three market groups (consumer, intermediate and investment goods) registered strong rates of output growth in July. Investment goods producers posted the fastest rise in output. Meanwhile, consumer goods producers saw the least marked upturn in overall business conditions, with this sub-category the only market group to see a drop in staffing levels over the month.