December data signalled a further solid expansion of U.S. manufacturing production, alongside rising levels of employment and incoming new business. However, the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) fell from 54.8 in November to 53.9 in December (earlier ‘flash’ reading 53.7). As a result, the latest PMI figure indicated the weakest improvement in overall manufacturing sector business conditions since January.
Although the latest survey pointed to a solid rise in manufacturing output, the rate of expansion eased for the fourth month running to its least marked since January. Anecdotal evidence suggested that uncertainty towards the global economic outlook had contributed to slower production growth and softer new business gains during recent months.
Levels of new work continued to increase in December and the rate of expansion picked up slightly from the 10-month low recorded during November. Meanwhile, new export orders returned to growth at the end of 2014, but the upturn was only moderate and weaker than that seen for overall new orders. A number of manufacturers noted weak demand from the euro area and emerging markets, which contrasted with relatively strong spending patterns among domestic clients.
Manufacturing payroll numbers rose for the eighteenth successive month in December. However, the rate of job creation moderated to its least marked since July. Some survey respondents pointed to more cautious staff hiring policies at their plants amid signs of a reduced squeeze on operating capacity. Reflecting this, unfinished work increased at only a marginal pace in December, with the rate of backlog accumulation much slower than seen on average during 2014 as a whole.
Stocks of finished goods were depleted in December, thereby ending a five-month period of rising post-production inventory levels. Meanwhile, stocks of purchases increased only marginally, with the latest rise the slowest in the current six-month sequence of expansion.
Robust growth of input buying continued across the manufacturing sector in December, but the latest upturn in purchasing activity was the least marked for 11 months. Despite a softer upturn in input buying, suppliers’ delivery times lengthened for the eighteenth month running.
Input price inflation eased for the third successive month to its lowest since April 2013. Survey respondents widely reported falling commodity prices and reduced oil-related costs. Meanwhile, factory gate price inflation hit a seven-month low in December.
Large manufacturers (500+ employees) continued to outperform small and medium sized manufacturers in terms of output and new order growth during December. Job creation was broad-based across the manufacturing sector at the end of 2014, albeit led by large manufacturers.
By market group, the sharpest expansion of production levels was in the consumer goods sector, followed closely by intermediate goods. Meanwhile, investment goods producers posted the slowest increase in output.
Investment goods producers also saw the weakest rise in payroll numbers, with the moderate expansion in December contrasting with a strong and accelerated increase in employment levels among consumer goods producers.