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Solid rise in new orders in US manufacturing

Christian Fernsby ▼ | May 2, 2019
U.S. manufacturing firms registered a moderate improvement in operating conditions in April.
US manufacturing
America   The seasonally adjusted PMI 52.6, up slightly from March
Expansions in output and new orders picked up from March's recent lows, with new business growth the fastest for three months.

Despite a further rise in backlogs of work, the rate of job creation was the slowest since June 2017 and only moderate overall, in part reflecting skill shortages.

Expectations towards the coming year were relatively subdued and down to the lowest seen so far this year.

Meanwhile, inflationary pressures continued to soften for a sixth month running.

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 52.6, up slightly from March's recent low of 52.4.

This signalled that the latest improvement in the health of the U.S. manufacturing sector was the second-slowest since June 2017.

Although faster than that seen in March, the latest upturn in production across the goods producing sector was among the softest seen in the last two years and below the series trend.

Nonetheless, panellists linked the sustained rise in output to a further increase in new orders and efforts to clear backlogs.

New business growth also quickened from March's recent low in April.

The solid expansion was the fastest for three months, albeit notably slower than the 2018 average.

Anecdotal evidence suggested the rise in new orders was due to greater marketing activity and new product launches.

Foreign client demand remained subdued, however.

The marginal upturn in export sales was linked to the acquisition of new clients, but many highlighted global trade tensions and slowing foreign demand as factors dampening growth.

Although new business grew at a faster pace, the rate of job creation eased in April.

The rise in payroll numbers was the softest since June 2017, in part because firms struggled to find staff and replace leavers.

The slower jobs growth also reflected subdued confidence among manufacturers.

Output expectations dipped to a four-month low, with panellists expressing concerns surrounding less robust demand conditions in 2019 so far.

Meanwhile, manufacturing firms registered a rise in backlogs in April.

The rate of accumulation was the fastest since last November as new order growth outpaced the increase in output.

On the price front, input price inflation eased for the sixth successive month and signalled the slowest rise in cost burdens since July 2017.

Subsequently, firms increased their factory gate charges at a softer pace.

Finally, both pre- and post-production inventories continued to rise in April.

Manufacturing firms reportedly increased their stock holdings amid forecasts of further new order growth.

At the same time, lead times for inputs lengthened to the smallest extent since June 2017 as purchasing activity increased only moderately.

May 1, 2019