Domestic new orders are clearly improving. New export orders look stronger from Markit’s survey.
October data highlighted a modest rebound in U.S. manufacturing performance, driven by faster rises in output, new orders and employment levels. At 54.1, up from 53.1 in September, the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) pointed to the sharpest improvement in overall business conditions since April. Moreover, the latest data signalled a turnaround in growth momentum from the 22-month low recorded in August.
Manufacturing production increased at a robust and accelerated pace in October, with the rate of expansion the fastest for seven months. This reflected a reasonably strong upturn in new business volumes during the latest survey period.
New export sales continued to rise at only a modest pace in October, with survey respondents noting that the strong U.S. dollar remained a headwind to growth. Nonetheless, the latest rise in new work from abroad was the third in the past four months, and the fastest since September 2014.
Greater workloads placed pressure on operating capacity and contributed to another accumulation of unfinished work across the manufacturing sector in October. This in turn contributed to a rebound in employment growth from the 27-month low recorded during September.
Despite rising levels of incoming new work and an upturn in job creation, manufacturers remained relatively cautious in terms of their inventories of finished goods. Reflecting this, post-production stocks were lowered for the third month running and at the fastest pace since June 2014. At the same time, manufacturers sought to boost their stocks of purchases during October, with some citing expectations of rising workloads in the months ahead. Although only modest, the latest increase in pre-production inventories was the sharpest for almost a year.
Supply chain pressures persisted in October, as highlighted by longer delivery times from vendors. This was driven in part by greater input buying across the manufacturing sector over the month. Moreover, the latest expansion of purchasing activity was the fastest since June.
Manufacturers continued to benefit from falling commodity prices in October, with survey respondents widely commenting on reduced costs for steel and other metals. Measured overall, the latest fall in average cost burdens was the fastest since March. Meanwhile, manufacturers indicated that their factory gate charges rose only fractionally, with the rate of inflation the second-slowest for over three years.
The October PMI® registered 50.1 percent, a decrease of 0.1 percentage point from the September reading of 50.2 percent.
- The New Orders Index registered 52.9 percent, an increase of 2.8 percentage points from the reading of 50.1 percent in September.
- The Production Index registered 52.9 percent, 1.1 percentage points above the September reading of 51.8 percent.
- The Employment Index registered 47.6 percent, 2.9 percentage points below the September reading of 50.5 percent.
- Backlog of Orders registered 42.5 percent, an increase of 1 percentage point from the September reading of 41.5 percent.
- The Prices Index registered 39 percent, an increase of 1 percentage point from the September reading of 38 percent, indicating lower
raw materials prices for the 12th consecutive month.
- The New Export Orders Index registered 47.5 percent, up 1 percentage point from September, and the Imports Index registered 47 percent, down 3.5
percentage points from the September reading of 50.5 percent.
Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries.
Of the 18 manufacturing industries, seven are reporting growth in October in the following order: Printing & Related Support Activities; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Chemical Products; Paper Products; and Fabricated Metal Products. The nine industries reporting contraction in October — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Wood Products; and Computer & Electronic Products.
WHAT RESPONDENTS ARE SAYING …
• “Demand remains steady with three percent top line unit growth. [Dollar] ($) sales are flat due to currency and cost changes.” (Paper Products)
• “Currency exchange is having a large impact on business results.” (Chemical Products)
• “Energy market continues to struggle. Effects are beginning to bleed into other areas.” (Computer & Electronic Products)
• “Business is improving. We still need young machinists to replace those retiring.” (Fabricated Metal Products)
• “Business is picking-up in general.” (Transportation Equipment)
• “Some level of slowing, but activity is acceptable.” (Machinery)
• “Customer backlogs are increasing now that the perception[s] of raw material[s] pricing have bottomed out.” (Plastics & Rubber Products)
• “Sales demand becoming more consistent. Beginning to see slightly more capital spending by key customers. Outlook more positive than negative.” (Electrical Equipment, Appliances & Components)
• “Wood products market is sluggish with prices varying up/down depending on size and grade.” (Wood Products)
• “So far bird flu has not been reintroduced as bird migration begins.” (Food, Beverage & Tobacco Products)