MANUFACTURING PMIs
USA: Output returns to growth, but prices also rise at increased rate
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI™) posted 49.8 in September, up from 47.9 in August and higher than the earlier released ‘flash’ estimate of 48.9. With the exception of the slight expansion seen in April, operating conditions have deteriorated in ten of the last 11 months. Nonetheless, the latest decline in the sector’s health was only fractional.
Contributing to the upward movement in the headline figure was a return to output growth in September. Production increased at a marginal pace that was nonetheless the fastest since May. Firms often attributed the upturn to greater workforce numbers as companies sought to broaden capacity. Some manufacturers, however, noted that less downbeat demand conditions had helped to support the expansion in output.
New orders fell for the fifth month running in September, albeit at the slowest pace in this period. Firms continued to highlight strain on customer spending due to high interest rates and inflation. That said, some suggested that there were signs of a pick up in customer interest.
At the same time, new export orders continued to decrease as challenging economic conditions in key export markets dampened demand. The rate of decline was, however, the slowest in the current 16-month sequence of contraction.
Recent increases in oil prices reportedly pushed up costs for oil-derived products and transportation, according to panellists. The rate of cost inflation quickened again to the sharpest since April. In turn, firms sought to pass through greater operating expenses to customers through the fastest rise in selling prices in five months. Nevertheless, rates of inflation were well below their respective series averages and much softer than those seen over the last three years.
Greater hopes of a return to growth of new orders and further increases in output spurred firms into another round of hiring in September. The rate of job creation was modest and broadly in line with the long-run series average. Greater employment allowed firms to clear backlogs, as work-in hand fell solidly. The pace of decline was the slowest since April, however.
CANADA: PMI hits lowest level since May 2020
(…) Output and new orders both contracted in September. The decline in production was the steepest since August 2022, whilst for sales it was the worst performance since March. Firms widely commented that market demand was slow, and that some clients were waiting for price reductions before committing to new business. Similar factors were reported by panellists to have weighed on international demand.
New export orders fell for the first time in three months in September and to the steepest degree since May. Faced with dwindling workloads, further evidenced by the steepest reduction in backlogs of work for 40 months, manufacturers reduced both their purchasing activity and employment in September.
Regarding the latter, staffing numbers have now fallen for five successive months, though the latest rate of contraction was modest. Several firms noted ongoing challenges in recruiting additional staff. For input buying, manufacturers noted an excess of inventory at their plants and signalled a preference for reducing stocks rather than buying in new inputs. Overall, the drop in stocks of purchases was the steepest since June 2020. (…)
Suppliers continued to raise prices, although softening market conditions restricted their pricing power. The net impact was the weakest increase in input costs in the current four-month run of inflation. Manufacturers signalled ongoing success in pushing through higher input costs to clients, with output charges rising further in September. The rate of inflation was solid and above that signalled for input prices.
MEXICO: PMI slips into contraction in September, ending seven monthsequence of growth
(…) New business levels broadly stagnated in September, after increasing in the previous two months. Some firms attributed growth to the approval of pending agreements and new client wins. Other companies indicated that shortages of capital at their clients prevented them from placing new orders.
New export orders fell in September, following increases the previous two months. Surveyed firms noted lacklustre overseas demand for their products and delays from clients with new business pending approval in some cases. (…)
GLOBAL: Global manufacturing output contracts as demandweakens in September
(…) Output rose in only eight of the 29 nations for which data were available, including mainland China and the US. The euro area, Japan, UK, Canada and Brazil were among the economies to see production volumes scaled back.
A weaker intake of new orders was the main factor underlying lower output in September. Destocking also played a role, with inventories of both finished products and raw materials decreasing during the latest survey month.
Total new business and international trade volumes both decreased during September, albeit at slightly slower rates. Mainland China was one of only seven nations to register growth of total new orders, the others – with the exception of Greece – were also located (at least in part) in Asia. The rates of decline seen in the euro area, Japan and the UK were all severe, whereas the contraction registered in the US was comparatively mild. (…)
Construction Spending Continues to Buck the Headwinds
Construction activity this year has been largely resilient to broader macroeconomic headwinds. Total outlays increased 0.5% in August, solidifying an eight-month streak of improvements in 2023 and amounting to a 7.4% year-over-year gain.
Yet as construction outlays rise on trend, clear divisions are forming under the surface. An uptick in single-family starts has bolstered construction spending over the last few months, largely owed to builders’ success with incentives in the high mortgage rate environment. Multifamily outlays, by contrast, appear to be moderating as a near-record number of apartment units is set to deliver over the next few years.
Similar dynamics are playing out within nonresidential construction. A bump in manufacturing outlays was the single-largest driver of August’s overall increase in the nonresidential spending, a familiar theme following the shift toward domestic electric vehicle and semiconductor production.
Alternatively, tighter credit conditions and higher financing costs have weighed on commercial construction, which was the largest drag on nonresidential outlays in August.
