US Factory Activity Growth At Near 2-Year High: Markit

The Flash Markit Manufacturing PMI in the United States increased to 55.1 in January of 2017 from 54.3 in the previous month, beating market expectations of 54.5. It is the highest reading since March of 2015 as new work boosted output and purchasing activity while growth in new export work remained muted and employment eased.

The solid improvement in business conditions was largely driven by sharper increases in output and new orders, which rose at the fastest rates in 22-and 28-months respectively. At the same time, companies raised their purchasing activity at the steepest rate since early 2015 and increased their payrolls further in order to meet greater production requirements. Positive expectations around the demand outlook were highlighted by further increases in stocks of purchased items and finished goods, with the latter increasing at the quickest pace since the series began in early 2007. Optimism around the 12-month outlook for production also improved at the start of the year, and reached its highest level since March 2016.

U.S. manufacturers reported increased production for the eighth month running in January. Furthermore, the rate of expansion picked up to its sharpest since March 2015. Higher output was overwhelmingly linked by respondents to greater inflows of new work, with latest data showing the steepest increase in total new orders for 28 months. However, the upturn in new business appeared to be led by stronger domestic demand, as new export work rose only slightly at the start of 2017, as has been the case in each of the past four months.

Manufacturing employment continued to increase in January as firms looked to increase their capacity. Though solid overall, the rate of job creation eased slightly from the 18-month high seen in December. Nonetheless, a robust and accelerated upturn in new orders led to a further accumulation of work-inhand (but not yet completed).

Greater production requirements contributed to increased purchasing activity during January, with the rate of expansion the most marked in 22 months. As a result, stocks of inputs continued to increase, albeit at a softer pace than in December. Inventories of finished goods also rose at the start of the year, as a number of firms sought to increase their stock holdings in anticipation of further increases in new orders.

Companies reported a renewed deterioration in average vendor performance during January, with some panellists mentioning that this was due to suppliers being unable to keep up with demand. That said, the rate at which delivery times increased was modest overall.

The rate of input price inflation accelerated for the second month in a row in January amid reports of higher raw material costs. Moreover, the latest increase in cost burdens was the sharpest seen in 28 months. As a result, companies raised their selling prices for the fourth successive month, albeit at a moderate pace that was similar to that seen in December.

Looking ahead, firms were generally optimistic towards the 12-month business outlook in January. Furthermore, the degree of positive sentiment was at its highest since March last year. Companies that forecast increased output commented on strengthening client demand, new product releases and improving underlying market conditions.

US Factory Activity Growth At Near 2-Year High: Markit

Markit | Joana Taborda |
1/24/2017 2:58:22 PM