At 56.3 in July, down from 57.3 in June, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled the slowest improvement in overall manufacturing business conditions for three months.
The latest survey indicated that manufacturing production growth eased in July, after reaching its strongest pace for over four years in June. Nonetheless, the output index reading in July (60.4) was well above the 50.0 no-change mark and still pointed to an historically strong rate of growth.
Companies that reported higher levels of production generally cited stronger demand from domestic markets and the launch of new products at their plants. July data signalled a steep pace of overall new business growth across the manufacturing sector, albeit a softer expansion than in the previous month. Meanwhile, new export order growth remained relatively subdued, with the latest index reading unchanged from June‟s five-month low and only slightly above the neutral 50.0 value.
Manufacturers indicated a rise in payroll numbers for the thirteenth successive month in July. Anecdotal evidence cited increased new business inflows and greater backlogs of work. However, the rate of employment growth eased for the first time since April and was the least marked for 10 months. Reports from survey respondents suggested that slower payroll growth reflected a combination of natural wastage and more cautious hiring policies amid slower output growth in July.
Meanwhile, the latest survey signalled a robust rise in input buying across the manufacturing sector, which extended the current period of expansion to nine months. This in turn contributed to an increase in stocks of purchases during July. Inventories of finished goods also accumulated, albeit only marginally, which ended a 12-month period of falling post-production stocks.
Average cost burdens increased at a robust pace in July, with survey respondents widely reporting higher prices for raw materials (particularly metals). That said, the overall rate of input cost inflation eased from June‟s five-month high. Latest data pointed to a solid rise in factory gate prices, driven by higher cost burdens, and the pace of inflation picked up to a seven-month high in July.