Adjusted for seasonal influences, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.4 in June, down from 54.0 in May and the lowest reading since October 2013. The PMI was still above the neutral 50.0 threshold, but slightly below its average since the recovery began in late-2009 (54.3).
Softer output growth was a principal factor behind the decline in the headline index during June. In contrast, new business growth picked up slightly from May’s 16-month low and job creation accelerated to its strongest since November 2014.
The latest expansion of production volumes was the weakest recorded by the survey since January 2014. Some manufacturers cited greater efforts to fulfil orders from inventories in June, as highlighted by the first reduction in stocks of finished goods since December 2014. Moreover, there were reports that softer output growth reflected a degree of caution about the business outlook, as well as concerns about the impact of the strong dollar on competitiveness. Although new orders from abroad stabilized in June, this followed declines in export sales during each of the previous two months.
Meanwhile, overall volumes of new work expanded at a solid pace in June, but the latest upturn was still the second-slowest since January 2014. Improving U.S. economic conditions were cited as a factor supporting new business gains in June. However, some manufacturers noted that sharp declines in investment spending within the energy sector had weighed on new order volumes.
Higher overall levels of new work contributed to rising volumes of unfinished business in June, but the rate of backlog accumulation remained only marginal. A number of firms suggested that additional staff hiring had helped reduce pressure on operating capacity at their plants. Job creation has now accelerated in three of the past four months, with the latest upturn in manufacturing payroll numbers the fastest since November 2014.
Despite a moderation in production growth, input buying increased at a robust and accelerated pace during June. Meanwhile, the latest survey indicated that suppliers’ delivery times improved for the first time in two years. This was widely linked to an alleviation of transportation bottlenecks related to the west coast port strikes earlier in 2015.
Average cost burdens increased for the second month running in June, which contrasted with falling input prices earlier in the year. However, the rate of cost inflation was only modest and well below the long-run survey average. Meanwhile, factory gate price inflation remained marginal and eased slightly since May. Survey respondents suggested that higher input costs had only contributed to gradual rises in their average prices charged in recent months, in part reflecting strong competition for new work.