November data pointed to a sustained acceleration in U.S. manufacturing growth, with production volumes and incoming new work both rising at the fastest pace since March 2015. Stronger demand patterns, especially from domestic clients, resulted in greater input buying and increased payroll numbers across the manufacturing sector. Meanwhile, factory gate charges increased only slightly in November amid a slowdown in cost inflation from October’s two-year high.
At 54.1 in November, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) picked up from 53.4 in October and signalled the strongest improvement in business conditions for just over one year. The latest reading was up from the earlier ‘flash’ reading (53.9) and the joint-highest seen since March 2015, thereby signalling a robust improvement in manufacturing performance.
A sharp and accelerated rise in new business volumes was reported by manufacturing companies during November. This was mainly driven by domestic sales, as new orders from abroad increased only marginally since the previous month, with survey respondents citing competitive pressures and the strong dollar. Anecdotal evidence suggested that improving U.S. economic conditions and greater confidence among clients had led to rising levels of new work.
Mirroring the trend for new business, latest survey data highlighted the steepest rise in production volumes since early-2015. Increased manufacturing output has now been recorded for six months in a row, and the latest expansion was faster than the post-crisis trend. Alongside stronger sales, higher production also reflected efforts to boost inventories.
Stocks of finished goods have risen in each of the past two months, in contrast to the declines seen through the third quarter of 2016. Improving demand conditions resulted in a
sustained accumulation of unfinished work across the manufacturing sector in November. Backlogs have now risen for six months running, which is the longest continuous period since late-2015.
Renewed pressures on operating capacity resulted in a moderate increase in payroll numbers. Some firms linked greater staff recruitment to more confidence regarding the business outlook. This also contributed to further increases in input buying and pre-production inventories at manufacturing companies in November.
Despite rising purchasing activity, supplier lead times were broadly unchanged in November. Moreover, input cost pressures remained moderate, and the rate of inflation eased from October’s two year peak. Factory gate charges also increased at a slower pace in November, reflecting weaker cost pressures and intense competition for new work.
The November PMI® registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent. The New Orders Index registered 53 percent, an increase of 0.9 percentage point from the October reading of 52.1 percent. The Production Index registered 56 percent, 1.4 percentage points higher than the October reading of 54.6 percent.
The Employment Index registered 52.3 percent, a decrease of 0.6 percentage point from the October reading of 52.9 percent. Inventories of raw materials registered 49 percent, an increase of 1.5 percentage points from the October reading of 47.5 percent.
The Prices Index registered 54.5 percent in November, the same reading as in October, indicating higher raw materials prices for the ninth consecutive month. Comments from the panel cite increasing demand, some tightness in the labor market and plans to reduce inventory by the end of the year.
Of the 18 manufacturing industries, 11 are reporting growth in November in the following order: Miscellaneous Manufacturing; Petroleum & Coal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; and Primary Metals. The six industries reporting contraction in November — listed in order — are: Printing & Related Support Activities; Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Furniture & Related Products.