Growth in the U.S. manufacturing sector gathered momentum in February, with output and new orders both rising at sharper rates than seen at the start of the year. Input costs decreased marginally for the second month running, but firms continued to raise their output prices. Meanwhile, delays in the delivery of items contributed to an accumulation of backlogs of work and a record increase in finished goods stocks.
The final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) rose to 55.1 in February from 53.9 in the previous month. The reading signalled the most marked improvement in business conditions in the sector since October 2014.
Manufacturing production growth quickened to the sharpest in four months during February, with firms linking higher output to increases in new business. This was highlighted by a marked rise in total new orders. As with production, the rate of growth in new business was the fastest since last October. Meanwhile, new export orders continued to rise, albeit only modestly.
Higher new orders was one factor leading to an accumulation of backlogs of work in February, while supplier delivery delays had also contributed to rising outstanding business. Delivery times lengthened to the greatest extent since February 2014, with firms reporting adverse weather conditions in some parts of the country. Meanwhile, stocks of finished goods increased at the sharpest pace since the series began.
Manufacturers raised employment, as has been the case in each month since July 2013. That said, the rate of job creation eased to the slowest in seven months. Higher levels of new work and the replacement of leavers contributed to the latest expansion of staff numbers.
Input prices at manufacturing firms decreased for the second successive month, albeit only marginally. The latest fall in costs was partly linked to reduced prices for steel and other commodities.
Although input costs declined, firms continued to raise their output prices in February. The rate of inflation remained modest, but picked up to a three-month high. Charges have been raised in each month since September 2012.
A solid increase in purchasing activity was recorded amid reports of greater production requirements. That said, the rate of expansion eased to the slowest since January 2014.
Strong improvements in business conditions were seen across small, medium and large companies during February. Meanwhile, SMEs posted a faster rate of job creation than large companies. The medium sizeband was the only one to see a fall in input prices during the month.
Rates of improvement were broadly consistent across market groups, with the greatest strengthening of operating conditions at investment goods firms. Data suggested that the overall fall in input prices was centred on intermediate goods producers.