U.S. manufacturing conditions reach three year high

Posted on 3 Sep 2014 by Callum Bentley

U.S. manufacturers indicated a strong improvement in overall business conditions during August, driven by faster rises in output, new orders and payroll numbers.

The latest Markit Purchasing Managers’ Index (PMI) survey also signalled a boost to production schedules from greater export sales, with new work from abroad increasing at the steepest pace for three years.

At 57.9 in August, up from 55.8 in July, the final seasonally adjusted Markit U.S. Manufacturing PMI remained well above the neutral 50.0 value.

This is in contrast to the latest Markit/CIPS PMI for the UK, which showed a growth marking of 52.5 for last month, its lowest level since June last year and below all forecasts from a revised 54.8.

The fall is driven by the new orders component, which dropped to its lowest since April 2013 at 52.9, down from 56.8 in July in its biggest one-month drop in two years.

Whereas, the latest headline PMI reading for the U.S. indicated the sharpest improvement in business conditions since April 2010.

August data indicated a further steep increase in production volumes, driven by a sharp and accelerated expansion of incoming new work. The latest rise in new orders was the second-fastest since April 2010. Anecdotal evidence cited improving domestic economic fundamentals as well as stronger export demand.

Backlogs of work increased at manufacturing firms in August, as has now been the case in each of the past seven months. As a result, manufacturers boosted their payroll numbers over the month, with the rate of employment growth accelerating to its sharpest since March 2013.

Stronger inflows of new work and increased production volumes contributed to a sharp and accelerated rise in input buying during August. The latest expansion of purchasing activity was the fastest since the survey began, which placed some pressures on suppliers’ lead-times. Latest data indicated that vendor performance deteriorated for the fourteenth month running and at the most marked rate since the weather-related delays seen in February.

Reports from survey respondents suggested that the improving demand environment resulted in efforts to boost stocks in August. Pre-production inventories and stocks of finished goods both increased at the fastest pace in the survey history.