Very strong report.
May data signalled that output growth in the U.S. manufacturing sector continued to accelerate through the second quarter of 2014, supported by another sharp improvement in new business volumes. Greater production requirements and efforts to rebuild stocks of purchases meanwhile contributed to a survey-record increase in input buying during the latest survey period.
Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI picked up to 56.4 in May, from 55.4 in April. The latest survey pointed to a steep increase in production levels, with the rate of expansion accelerating for the second month running to the fastest since February 2011. Anecdotal evidence from survey respondents cited improving underlying demand, better economic conditions and greater investment spending among clients.
Volumes of new work received by manufacturing companies continued to increase at a robust pace in May. The latest rise in new business was supported by a combination of increased domestic demand and the most marked rise in new export work since July 2013. A number of companies cited rising spending patterns among clients in developed markets.
Higher levels of new business placed some pressures on operating capacity in May, as highlighted by a robust and accelerated increase in backlogs of work in the manufacturing sector. An accumulation of outstanding work also supported job creation in May, with manufacturing payroll numbers increasing for the eleventh successive month.
Manufacturers indicated a renewed rise in preproduction inventory levels in May, and the rate of expansion was the most marked since April 2012. Increased stocks of purchases reflected the steepest expansion of input buying since the survey began in late 2009. Meanwhile, stronger demand for raw materials led to a deterioration in supplier performance for the eleventh month running in May.
Meanwhile, the latest survey signalled that input cost inflation picked up to its fastest since January. Despite a strong increase in input prices, May data indicated that factory gate price inflation was only marginal and the weakest for almost two years.
May data indicated that large manufacturers (more than 500 employees) registered the fastest output expansion of the three company size categories monitored by the survey. However, large manufacturers saw job creation ease to only a marginal pace that was the slowest for 11 months in May. In contrast, small and medium sized manufacturers indicated an upturn in employment growth during the latest survey period.
Consumer goods producers recorded the strongest improvement in overall business conditions of the three market groups monitored by the survey in May. Latest data pointed to the sharpest rise in new business received by consumer goods producers for just over four years. Only the investment goods sector posted a moderation in new order growth in the latest survey period.
