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Strong U.S. manufacturing output growth continues

Staff writer ▼ | March 25, 2014
U.S. manufacturing business conditions continued to improve at the end of the first quarter, as highlighted by the Markit Flash U.S. Manufacturing Purchasing Managers' Index (PMI) registering 55.5 in March.
US factory
US factoryU.S. manufacturing business conditions continued to improve at the end of the first quarter, as highlighted by the Markit Flash U.S. Manufacturing Purchasing Managers' Index (PMI) registering 55.5 in March.


The index, which is based on approximately 85% of usual monthly replies, was down from 57.1 in February but still the second- highest since January 2013. Reports from survey respondents cited improving economic fundamentals and, to a lesser degree, an on-going catch-up effect following weather disruptions earlier in the year.

The headline U.S. Manufacturing PMI posted 55.4 on average over the first quarter of 2014, up from 53.8 in Q4 2013, to suggest that the sector remains on a solid growth trajectory. March data indicated that the overall index was supported by sharp rises in output (57.5) and new business (58.0). Growth of manufacturing production was only slightly less marked than the near-three year high registered in February.

Manufacturers noted that higher levels of output reflected rising volumes of new work and on-going efforts to reduce backlog accumulation at their plants. The latest increase in work-in-hand (but not yet completed) was less steep than the survey-record high seen in February, suggesting that some companies have started to fulfil orders that were disrupted by adverse weather earlier in the year.

March data suggested that subdued export demand weighed on overall new order growth in the manufacturing sector. Although new business from abroad rose for the second month in a row, the pace of expansion remained only marginal and was much weaker than for overall new orders. A solid rate of job creation was sustained across the manufacturing sector in March. Staffing levels have increased in each month July 2013 and the ate of employment growth was stronger than seen on average over this period.

Survey respondents widely linked staff recruitment to improving confidence about the business outlook and greater optimism about the prospects for the U.S. economy as a whole. Meanwhile, there were signs in March that supply chains started to recover from adverse weather disruptions and subsequent bottlenecks earlier in the year. This was highlighted by the seasonally adjusted suppliers' delivery times index rising sharply over the month to its highest level since June 2013.

Although the index remained below the neutral 50.0 threshold, the month-on-month index rise was the greatest since the survey began in May 2007. A slower deterioration in vendor performance was achieved in March despite a robust expansion of purchasing activity across the manufacturing sector. Higher levels of input buying have now been recorded for five successive months.

This in turn contributed to an increase in stocks of purchases. Although only marginal, the latest increase in pre- production inventories was the most marked since January 2013.


 

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