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Output expands in U.S. manufacturing at joint-weakest rate since September 2017

Staff Writer | December 5, 2018
November survey data signalled a solid improvement in operating conditions across the U.S. manufacturing sector, despite the headline PMI dipping to a three-month low.
Manufacturing in U.S.
America   A solid improvement
The upturn was supported by the fastest increase in new orders since May and a sharp rise in employment.

Output also rose solidly, despite growth easing to the joint-weakest in over a year.

Capacity pressures were also evident through a further rise in backlogs.

Panellists continued to highlight stockpiling activity amid expectations of further rises in raw material prices, with input buying increasing strongly.

Cost burdens rose markedly as shortages at suppliers and tariffs pushed up input prices.

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 55.3 in November, down slightly from 55.7 in October.

Although the headline figure dipped to a three-month low, it indicated a solid improvement in the health of the sector that was above the series trend.

Production continued to increase in November.

The rise in output was solid overall, albeit the joint-slowest in over a year.

Nonetheless, panellists commonly reported on more favourable demand conditions.

Conversely, new orders increased at a sharp and accelerated pace in November.

The rise in new business was the quickest since May and was often linked to increased client demand and new product launches.

Foreign demand also picked up, with new export orders expanding at the fastest pace for nine months.

Firms registered a further rise in employment in November, with many noting that greater production requirements had prompted them to hire additional workers.

The rate of job creation was sharp and the second-fastest in the year-todate.

Nonetheless, panellists reportedly struggled to cope with the steep increase in new orders, despite higher staffing levels, as backlogs of work continued to increase.

The level of work-in-hand grew at one of the fastest rates in over three years.

In response to higher amounts of new and unfinished work, manufacturing firms registered a strong expansion in buying activity.

Input purchases also rose due to concerns of further tariffs and resulting increases in raw material costs.

Stockpiling activity was linked to a sharp deterioration in vendor performance, as demand for inputs continued to outstrip supply.

Subsequently, cost burdens faced by goods producers rose further.

Although the rate of inflation was slower than those seen earlier in the year, it remained marked.

A combination of tariffs and supplier shortages were linked to higher raw material prices.

Firms were reportedly able to partly pass greater cost burdens on to clients through higher output charges.

Business confidence dipped to the weakest since September 2017.

Although optimism stemmed from stronger demand, some raised concerns surrounding the sustainability of the current sequence of new order growth.