Month: June 2015

May data indicated a further robust expansion of U.S. manufacturing output, but new business volumes increased at the slowest rate since the start of 2014. Softer growth of incoming new work partly reflected an overall decline in new export sales for the second month running.

Nonetheless, payroll numbers rose at a solid pace, with the latest upturn in manufacturing employment the fastest for six months. Meanwhile, both input prices and output charges increased at modest rates during the latest survey period.

At 54.0, down fractionally from 54.1 in April, the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) remained comfortably above the 50.0 no-change level, but signalled the least marked improvement in operating conditions since January.

Softer growth of incoming new business was the main factor dragging down the headline PMI in May. New order volumes expanded at the weakest pace for 16 months. Anecdotal evidence from survey respondents cited lower spending among clients in the oil and gas industry, alongside subdued demand patterns in external markets.

May data indicated a slight overall decline in new work from abroad for the second month running, which represented the first back-to-back reduction in export sales since mid-2013. Manufacturers generally noted that the strong dollar continued to have a negative influence on new export order books.

Slower growth in total new business wins contributed to a weaker rise in production volumes in May. The latest increase in manufacturing output was the least marked since December 2014. Moreover, backlogs of work increased only marginally, and at the slowest pace for four months.

Manufacturing job creation was recorded for the twenty-third consecutive month in May. The latest increase in payroll numbers was the strongest since November 2014. Survey respondents attributed additional staff recruitment to long-term expansion plans and robust confidence towards the business outlook.

The latest survey indicated a degree of caution among manufacturers in terms of their inventory volumes, with stocks of purchases and post-production inventories both rising only marginally. Input buying expanded at the slowest pace since the start of 2014.

Meanwhile, average cost burdens increased in May, which ended a four-month period of falling input prices. Output charge inflation picked up only slightly from April’s 11-month low.

The ISM:

The May PMI^® registered 52.8 percent, an increase of 1.3 percentage points over the April reading of 51.5 percent. The New Orders Index registered 55.8 percent, an increase of 2.3 percentage points from the reading of 53.5 percent in April. The Production Index registered 54.5 percent, 1.5 percentage points below the April reading of 56 percent. The Employment Index registered 51.7 percent, 3.4 percentage points above the April reading of 48.3 percent, reflecting growing employment levels from April. Inventories of raw materials registered 51.5 percent, an increase of 2 percentage points from the April reading of 49.5 percent. The Prices Index registered 49.5 percent, 9 percentage points above the April reading of 40.5 percent, indicating lower raw materials prices for the seventh consecutive month. Comments from the panel carry a positive tone in terms of an improving economy, increasing demand, and improving flow of goods through the West Coast ports. Also noted; however, are continuing concerns over the price of the US dollar and challenges affecting markets related to oil and gas industries.

Of the 18 manufacturing industries, 14 are reporting growth in May in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; and Chemical Products. The two industries reporting contraction in May are: Textile Mills; and Computer & Electronic Products.

New Orders

ISM^®’s New Orders Index registered 55.8 percent in May, an increase of 2.3 percentage points when compared to the April reading of 53.5 percent, indicating growth in new orders for the 30th consecutive month. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

The 11 industries reporting growth in new orders in May — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; and Chemical Products. The only industry reporting a decrease in new orders during May is Petroleum & Coal Products. Six industries reported no change in new orders in May compared to April.

New Export Orders*

ISM^®’s New Export Orders Index registered 50 percent in May, indicating that the volume of new export orders was unchanged from April.

The seven industries reporting growth in new export orders in May — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting a decrease in new export orders during May are: Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; and Machinery. Six industries reported no change in New Export Orders in May compared to April.

May data signalled a modest acceleration in the rate of expansion of the eurozone manufacturing sector. The final seasonally adjusted Eurozone Manufacturing PMI® posted 52.2, matching March’s ten-month high but coming in just below the earlier flash estimate of 52.3.

Manufacturing production expanded again in May, extending the current sequence of growth to 23 months. Although the rate of increase ticked lower, it was still among the fastest seen over the past year. The trends in both total new orders and new export business both improved, suggesting output growth should be sustained in the coming months.

New business and new export orders both rose at the fastest rates in just over a year. The improved level of demand encouraged firms to take on additional staff, leading employment to rise for the ninth month running. Part of the increase in jobs reflected rising levels of outstanding business. Of the remaining countries for which data were available, Spain, the Netherlands and Italy were the leading lights. Germany and Austria saw modest expansions and France a further contraction.

Output and new orders in Spain rose at the quickest pace since 2007, underpinned by the strongest gain in new export business for 15 years. Production and new order growth in Italy was the fastest in over four years, while accelerations were also signalled for the Netherlands. All three of these nations registered solid job creation.

Output growth in Germany slowed sharply to a five-month low in May. The rates of increase in both total new business and new export orders also remained muted, in turn slowing the pace of job creation. Austria saw a modest acceleration in output growth, despite a slight decrease in new orders, and further headcount reductions.

The downturn in production at French manufacturers was extended to 12 months in May. New orders and employment also both fell, but there was a mild pick up in new export orders received.

Cost pressures remained on the upside in May, as input prices rose for the third month running and to the greatest extent since April 2012. The euro exchange rate and recent oil price increases both contributed to the latest rise in costs. Input price inflation was recorded in all of the nations except Austria, with accelerations signalled in each of the ‘big-five’ countries (Germany, Italy, France, Spain and the Netherlands).

Meanwhile, average output charges were unchanged since April. Increases were signalled in Germany, Italy and Spain, while French, Dutch and Austrian manufacturers all reduced their average selling prices.