Markit Flash U.S. Manufacturing PMI

  • Manufacturing PMI drops to its lowest level since October 2013
  • Output, new orders and employment all expand at slower rates in August
  • Input cost inflation picks up fractionally, but remains well below the survey average

U.S. manufacturers indicated a renewed loss of momentum during August, with output, new business and payroll numbers all increasing at a slower rate than in the previous month. As a result, the headline seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index dipped from 53.8 in July to 52.9 in August. The index remained above the neutral 50.0 threshold, but the latest reading was the lowest since October 2013.

The main factor weighing on the headline index was a slowdown in manufacturing output growth from the three-month high recorded during July. Moreover, the latest rise in production volumes was the weakest since the weather-related slowdown recorded in January 2014. Some survey respondents cited a cyclical slowdown in new business growth, as well as heightened uncertainty regarding the demand outlook in August.

Latest data indicated a solid expansion of overall new order volumes received by manufacturers, but the rate of growth moderated slightly since July. Subdued export sales remained a drag on new business intakes in August. Reflecting this, new work from abroad decreased for the fourth time in the past five months, with a number of firms attributing the decrease to competitive pressures related to the stronger exchange rate. There were also reports that weak capital spending among energy sector clients continued to weigh on some manufacturers’ order volumes.

Softer rates of output and new business growth contributed to greater caution regarding staff hiring in August. The latest survey pointed to a slowdown in job creation to its least marked since July 2014. Meanwhile, backlogs of work increased only slightly, and at the slowest pace for three months.

Growth of input buying picked up in August, but remained close to the 18-month low recorded in July amid reports from survey respondents citing cautious inventory policies. Moreover, stocks of finished goods fell for the first time in 2015 so far. Although only marginal, the rate of decline in post- production inventories was the greatest for just over a year.

August data pointed to broadly similar rates of input price and output charge inflation as those recorded during the previous month. Higher average cost burdens have now been recorded for four months in a row, but the rate of inflation remained well below the long-run survey average in August. Moreover, the latest increase in factory gate charges was only slight, with survey respondents linking this to subdued cost pressures, especially in terms of raw material prices.

Markit Economics

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell