U.S. manufacturers signalled another moderate upturn in both production volumes and incoming new work during September, but the latest survey indicated a further loss of growth momentum from July’s recent peak. Softer overall growth was attributed to generally subdued client demand, alongside a drop in new export sales for the first
time in four months.
At the same time, manufacturers sought to streamline their inventories of finished goods, with the pace of stock depletion the fastest since November 2015. The latest survey also pointed to cautious staff hiring strategies, although the rate of job creation picked up from August’s recent low.
The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 51.5 in September (flash: 51.4), down slightly from 52.0 in August, to signal the weakest improvement in overall business conditions since June. Slower rates of output and new order growth were the main factors weighing on the headline index, which more than offset a stronger contribution from the staff hiring component.
September data highlighted that production growth eased to a three-month low, driven by a weaker upturn in new work and greater efforts to streamline stocks of finished goods. The latest increase in new business volumes was the slowest seen so far in 2016. Some survey respondents commented on delays to decision making among clients ahead of the presidential election.
Moreover, there was an additional drag from export sales, with new work from abroad falling fractionally in September, which contrasted with the solid expansion seen in August. Manufacturers noted that the strong dollar continued to exert a negative influence on new export orders.
Softer new business growth resulted in more cautious inventory policies across the manufacturing sector. Stocks of finished goods decreased for the fourth month running and at the fastest pace since late-2015. Pre-production inventories also fell in September, but the rate of decline was only marginal.
Despite another slowdown in growth momentum, the latest survey signalled a marginal increase in backlogs of work at manufacturing firms. This was generally linked to the launch of new products and, in some cases, subdued jobs growth in recent months. September data indicated that payroll numbers increased more quickly than in August. However, the pace of staff hiring remained weaker than the average since the jobs rebound began in early-2010.
Meanwhile, latest survey data pointed to only a slight rise in average cost burdens at manufacturing firms. This provided some scope to stimulate demand through price discounting. Although only marginal, the latest fall in factory gate charges was the fastest since April.
The September PMI® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent. The New Orders Index registered 55.1 percent, an increase of 6 percentage points from the August reading of 49.1 percent. The Production Index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The Employment Index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The Prices Index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month. Manufacturing expanded in September following one month of contraction in August, with nine of the 18 industries reporting an increase in new orders in September (up from six in August), and 10 of the 18 industries reporting an increase in production in September (up from eight in August).
Of the 18 manufacturing industries, seven are reporting growth in September in the following order: Nonmetallic Mineral Products; Furniture & Related Products; Textile Mills; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Paper Products. The 11 industries reporting contraction in September — listed in order — are: Printing & Related Support Activities; Petroleum & Coal Products; Wood Products; Apparel, Leather & Allied Products; Transportation Equipment; Machinery; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Chemical Products; and Electrical Equipment, Appliances & Components.
ISM®’s New Orders Index registered 55.1 percent in September, which is an increase of 6 percentage points when compared to the 49.1 percent reported for August, indicating growth in new orders following one month of contraction. A New Orders Index above 52.2 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
The nine industries reporting growth in new orders in September — listed in order — are: Wood Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; Paper Products; and Machinery. The six industries reporting a decrease in new orders during September — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Transportation Equipment; Electrical Equipment, Appliances & Components; Chemical Products; and Textile Mills.
New Export Orders*
ISM®’s New Export Orders Index registered 52 percent in September, a decrease of 0.5 percentage point when compared to the 52.5 percent reported for August, indicating growth in new export orders for the seventh consecutive month.
The seven industries reporting growth in new export orders in September — listed in order — are: Wood Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Computer & Electronic Products. The seven industries reporting a decrease in new export orders during September — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Machinery; and Plastics & Rubber Products.
And rather coincidentally, ISM bounced to perfectly match PMI…