US Factory Activity Growth Weakest Since 2009

The flash Markit Manufacturing PMI for the United States came in at 50.8 in April of 2016, down from 51.5 in the previous month and below market expectations of 52. It is the lowest reading since September of 2009 as production almost stagnated, new business growth slowed and job creation was the weakest since June of 2013.

The latest upturn in production levels was only fractional and the slowest recorded by the survey since the recovery began in October 2009. Manufacturers cited generally subdued demand conditions, delays to spending decisions among clients and ongoing weakness within the energy sector. 

April data pointed to a renewed slowdown in new business growth, with the latest expansion the least marked so far in 2016. Some survey respondents suggested that uncertainty in relation to the economic outlook and political climate had weighed on client spending in April. Moreover, export sales continued to act as a drag on overall new business volumes. Although only modest, the latest survey pointed to the sharpest drop in new work from abroad since November 2014. 

Backlogs of work fell for the third successive month in April, thereby suggesting a lack of pressure on operating capacity across the manufacturing sector. The latest decrease in workin-hand (but not yet completed) was the fastest for just over six-and-a-half years. This contributed to a near-stalling of jobs growth among manufacturing firms in April, with the latest rise in payroll numbers only fractional and the weakest since June 2013. 

Manufacturers indicated that tighter inventory management strategies persisted in April, led by the sharpest drop in stocks of purchases since the start of 2014. At the same time, post- production inventories decreased at a moderate pace and manufacturers recorded a renewed fall in purchasing activity. Despite softer demand for inputs, latest data signalled the sharpest deterioration in vendor performance since September 2015, which some survey respondents linked to insufficient stocks and capacity cuts among suppliers. 

Average cost burdens increased slightly in April, thereby ending a seven-month period of sustained input price declines. Manufacturers noted that higher labor costs and rising prices for metals and plastics had contributed to the overall increase in their cost burdens. 

Factory gate charges decreased for the third month running in April, albeit at only a marginal pace. Companies that reported a drop in their output charges generally cited subdued market conditions and corresponding pressure on operating margins.

US Factory Activity Growth Weakest Since 2009

Markit | Joana Taborda |
4/22/2016 2:56:05 PM