March data indicated subdued growth momentum across the U.S. manufacturing sector, thereby continuing the trend seen throughout 2016 to date. At 51.4, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) was up fractionally from 51.3 in February, but still well below the post-crisis average (54.1).
Moreover, looking at the average PMI reading for Q1 as a whole (51.7), the headline index pointed to the weakest improvement over any quarter since Q3 2012.
Slightly stronger rates of output, new business and employment growth helped to support the headline index in March, while a key factor weighing on the headline index was the sharpest decline in pre-production inventories since January 2014.
Although manufacturing production growth picked up from the 28-month low recorded in February, the latest rise was only marginal and one of the weakest seen over the past two-and-a-half years. Anecdotal evidence from survey respondents suggested that relatively subdued demand conditions and, in some cases, efforts to streamline post-production stocks, had acted as a headwind to output growth in March.
New business volumes continued to increase across the manufacturing sector, but the latest expansion was only slightly faster than in February and still weaker than the post-crisis trend. Survey respondents noted that lower capital spending across the energy sector and subdued export demand had weighed on overall new order growth. Reflecting this, latest data indicated that new work from abroad was unchanged in March, following a marginal decline during the previous month.
Despite ongoing weak new business and output growth, the latest survey highlighted a modest rebound in manufacturing job creation from February’s five-month low. Companies reporting a rise in payroll numbers mainly cited long-run expansion plans and efforts to lower their backlogs of work.
Manufacturers signalled a further reduction in their inventory volumes in March. The latest fall in stocks of finished goods was the fastest since November 2015, while pre-production inventories declined at the steepest pace for over two years. At the same time, input buying rose at only a modest pace and supplier performance was reported to have deteriorated slightly.
On the prices front, the latest survey indicated that manufacturers’ average cost burdens dropped for the seventh month running. However, the rate of decline was only fractional and the slowest over this period. Reduced operating costs and strong competition for new work in turn resulted in price discounting across the manufacturing sector during March. Although marginal, this was only the second instance of falling output charges recorded by the survey over the past three-and-a-half years.