Business conditions continued to improve across the U.S. manufacturing sector in November, but the pace of recovery eased to its weakest since the start of 2014. This was highlighted by the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registering 54.8 in November (earlier ‘flash’ reading 54.7), down from 55.9 in October and the lowest reading for ten months.
November data signalled that manufacturing output growth moderated for the third month running. Although still indicative of a robust rise in production volumes, the latest survey pointed to the weakest pace of expansion since January. Manufacturers mostly commented that slower new business gains, especially from export markets, had weighed on output growth at their plants.
Volumes of new work received by U.S. manufacturers continued to increase at a solid pace during November, but the latest rise was the weakest since the start of the year. Anecdotal evidence suggested a greater degree of caution among clients and weaker sales to export markets. Although only modest, the latest data indicated that new business from abroad decreased at the fastest pace since June 2013.
The latest survey indicated that backlogs of work were broadly unchanged across the U.S. manufacturing sector, which ended a nine-month period of expansion. Despite reduced pressure on operating capacity, manufacturing job creation remained relatively strong in November. Moreover, the rate of employment growth accelerated since the previous month and was the second-fastest since January 2013.
There were again signs of pressure on supply chains in November, as highlighted by a deterioration in vendor performance for the seventeenth successive month. However, latest data indicated that input buying growth eased to its least marked since March. Manufacturers recorded a solid increase in their pre-production inventories during November. Meanwhile, stocks of finished goods were accumulated for the fifth month running.
Input price inflation eased further in November, with the latest rise in average cost burdens the slowest since April. A number of survey respondents cited lower commodity prices and falling energy costs at their plants. Factory gate price inflation also remained relatively subdued in November, reflecting strong competition for new work and falling input cost pressures across the manufacturing sector.
Large manufacturers (500+ employees) bucked the weaker overall trend seen across the sector in November, with business conditions improving at the fastest rate for almost five years. Meanwhile, small and medium sized manufacturers saw a moderation in growth momentum during the latest survey period.
Intermediate and investment goods producers recorded the strongest improvements in business conditions respectively in November. Meanwhile, consumer goods producers were the weakest performing market group, with operating conditions improving at the slowest pace since October 2013.
Despite a slip in the November ISM Composite Index of Factory Sector Activity to 58.7, improvement in factory sector activity continues. The latest reading left the three-month average at 58.1, close to its highest level since early-2011.