February data highlighted a setback for the U.S. manufacturing sector, with growth momentum slipping back again after the slight rebound seen at the start of 2016. The latest survey pointed to the weakest overall improvement in business conditions for just over three years. At 51.0 in February, down from 52.4 in January, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)1 was also at its joint-lowest level since September 2009. Softer rates of output, new business and employment growth all weighed on the headline index.
Manufacturing output growth slowed for the third time in the past four months during February. At the same time, new business volumes increased only marginally, and at one of the weakest rates seen over the past three years.
Manufacturers overwhelmingly linked the slowdown to softer underlying demand patterns in February, while only a small minority cited temporary weather-related disruptions. There were reports that weaker business sentiment, alongside uncertainty about the general economic outlook, had encouraged clients to delay spending decisions during the latest survey period.
Meanwhile, the strong dollar and less favourable global economic conditions continued to act as a drag on export sales in February. Reflecting this, new work from abroad decreased at the most marked pace since April 2015.
Softer demand patterns contributed to a renewed decline in pressures on operating capacity across the manufacturing sector during February. This was highlighted by the sharpest reduction in backlogs of work since September 2009.
Input buying fell in February, thereby ending a 27-month period of expansion, while manufacturers’ finished goods inventories built up for the third month running. Employment growth was maintained in February, although the rate of job creation was one of the weakest seen over the past three years.
Manufacturers experienced a slight shortening of suppliers’ delivery times in February, with the improvement in vendor performance the most marked since June 2013. Survey respondents mostly attributed weaker supply chain pressures to softer demand for inputs.
Latest data signalled a reduction in manufacturers’ average cost burdens for the sixth successive month. Weaker client spending patterns and lower operating costs in turn contributed to price discounting across the manufacturing sector in February. Although only modest, factory gate prices dropped at the fastest pace since June 2012.