January data pointed to a further upturn in business conditions across the U.S. manufacturing sector, but the overall rate of improvement eased further from last August’s peak. This was highlighted by a drop in the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) from 53.9 in December to 53.7 in January. Although the headline index remained above the neutral 50 threshold, the latest reading was lowest for 12 months.
Slower new business growth was a key factor weighing on the overall performance of the U.S. manufacturing sector in January. Volumes of new work have increased in each month since September 2009, but the latest upturn was the weakest for a year and slightly slower than the average seen during the current period of expansion. Reports from survey respondents suggested that improving domestic economic conditions continued to boost new order levels, but overall export demand remained lacklustre. Meanwhile, some manufacturers noted that reduced spending among clients operating in the oil and gas sector had weighed on new order volumes during January.
Despite softer new business growth, manufacturing sector production levels increased at a robust pace during the latest survey period. Moreover, the rate of output growth picked up slightly from the 11-month low registered in December.
Payroll numbers increased in the U.S. manufacturing at the start of 2015, thereby extending the current period of continuous expansion to 19 months. The rate of job creation remained solid, and picked up slightly from that recorded in December. Greater levels of staff hiring were linked to expectations of rising workloads and improved profitability in the months ahead. Nonetheless, firms remained cautious in terms of input buying in January, with purchasing activity rising at the least marked pace for 12 months and pre-production inventories increased only fractionally.
U.S. manufacturers registered a slight reduction in their overall cost burdens in January, which ended a 29-month period of sustained input price inflation. Although only marginal, the decrease in input costs was one of the fastest seen since mid-2009, which survey respondents mainly linked to falling oil prices. Meanwhile, manufacturers indicated only a marginal increase in their average prices charged, largely reflecting subdued cost pressures in recent months.