February data indicated a sustained improvement in U.S. manufacturing business conditions. At 54.3, up from 53.9 in January, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) has now registered above the 50.0 no-change value for almost five-and-a-half years. The latest reading was the highest since last November, but still weaker than the average for 2014 as a whole (55.9). Slower rates of new business and employment growth were the main factors weighing on the headline index in February.
Manufacturing companies indicated a robust and accelerated expansion of production volumes during February. The latest increase in output was the most marked since October 2014, with survey respondents noting that improving economic conditions and rising client spending continued to boost production schedules.
Overall new order levels increased again in February, which marked five-and-a-half years of continuous new business expansion across the manufacturing sector. However, the latest rise in new work was the slowest for 13 months and export sales were close to stagnation in February. Some firms suggested that weaker demand for oil and energy infrastructure projects had weighed on new business intakes. Meanwhile, there were reports that subdued underlying export demand had contributed to softer gains in new work from abroad.
February data indicated greater caution in terms of job hiring across the manufacturing sector. Payroll numbers increased only modestly and at the slowest pace for seven months. Meanwhile, manufacturers pointed to the slowest rise in input buying since January 2014 and inventory volumes increased only slightly since the previous month.
Suppliers’ delivery times lengthened at a sharp and accelerated pace in February. The latest deterioration in vendor performance was the most marked for 12 months. Anecdotal evidence attributed worsening lead-times to snow disruption in the northeast, as well as delays to the receipt of imported materials following the west coast port strikes.
Manufacturers’ cost burdens continued to decline in February. Although the drop in input prices was only marginal, the latest index reading was the lowest since July 2012. Survey respondents cited falling prices for a range of commodities, especially steel. Meanwhile, factory gate charges increased at the slowest pace for two-and-a-half years.