IHS Markit US Manufacturing PMI™
Output expands at joint-weakest rate since September 2017
- Production growth eases but remains strong
- New orders rise at fastest rate for six months
- Employment increases solidly
Novermber survey data signaled a strong improvement in operating conditions across the U.S. manufacturing sector, despite the headline PMI dipping to a three-month low.Tweet this
LONDON--(BUSINESS WIRE)--November survey data signalled a strong improvement in operating conditions across the U.S. manufacturing sector, despite the headline PMI dipping to a three-month low. The upturn was supported by the fastest increase in new orders since May and a sharp rise in employment. Output also rose solidly, despite growth easing to the joint-weakest in over a year. Capacity pressures were also evident through a further rise in backlogs. Panellists continued to highlight stockpiling activity amid expectations of further rises in raw material prices, with input buying increasing strongly. Cost burdens rose markedly as shortages at suppliers and tariffs pushed up input prices.
The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 55.3 in November, down slightly from 55.7 in October. Although the headline figure dipped to a three-month low, it indicated a robust improvement in the health of the sector that was above the series trend.
Production continued to increase in November. The rise in output was solid overall, albeit the joint-slowest in over a year. Nonetheless, panellists commonly reported on more favourable demand conditions.
Conversely, new orders increased at a sharp and accelerated pace in November. The rise in new business was the quickest since May and was often linked to increased client demand and new product launches. Foreign demand also picked up, with new export orders expanding at the fastest pace for nine months.
Firms registered a further rise in employment in November, with many noting that greater production requirements had prompted them to hire additional workers. The rate of job creation was sharp and the second-fastest in the year-to-date. Nonetheless, panellists reportedly struggled to cope with the steep increase in new orders, despite higher staffing levels, as backlogs of work continued to increase. The level of work-in-hand grew at one of the fastest rates in over three years.
In response to higher amounts of new and unfinished work, manufacturing firms registered a strong expansion in buying activity. Input purchases also rose due to concerns of further tariffs and resulting increases in raw material costs. Stockpiling activity was linked to a sharp deterioration in vendor performance, as demand for inputs continued to outstrip supply.
Subsequently, cost burdens faced by goods producers rose further. Although the rate of inflation was slower than those seen earlier in the year, it remained marked. A combination of tariffs and supplier shortages were linked to higher input prices. Firms were reportedly able to partly pass greater cost burdens on to clients through higher output charges.
Business confidence dipped to the weakest since September 2017. Although optimism stemmed from stronger demand, some raised concerns surrounding the sustainability of the current sequence of new order growth.
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:
"Despite the headline PMI slipping to a three-month low, November saw manufacturers enjoy another encouragingly solid month of improving business conditions.
“Dig deeper behind the headline number and the picture brightens further. New orders rose at the fastest rate for six months, prompting manufacturers to continue to expand capacity to meet demand. The pace of job creation remained among the highest seen over the past decade.
“The survey acts as a reliable guide to the official manufacturing data, and suggests that factory output is growing at an annualised rate of around 1.5% so far in the fourth quarter, providing a material but by no means impressive contribution to GDP. As such, the data corroborate the flash PMI’s signal that the economy will likely see growth slow to a 2.5% rate in the fourth quarter.
“In a further sign that growth has peaked, business optimism about the year ahead waned to the lowest for over a year, albeit with the proportion of companies expecting output to be higher in a year’s time outnumbering those expecting a decline by 36% to 3%.”
Output at U.S. manufacturers continued to increase solidly in November. Where a rise was reported, firms attributed this to greater new order book volumes and stronger client demand. That said, the rate of expansion dipped below the series trend and was the joint-weakest since September 2017.
The rate of new order growth picked up in November, with new business increasing at the fastest pace for six months. The sharp upturn was commonly linked to greater client demand and new product launches. Around 16% of respondents noted a rise in new orders, compared to 11% who reported a fall.
NEW EXPORT ORDERS
New export orders increased for the fourth successive month in November, with the rate of expansion accelerating from October's fractional upturn. The rise in new business from abroad was attributed to more favourable demand conditions. Though modest, the pace of growth was the fastest for nine months.
BACKLOGS OF WORK
Reflecting a stronger rise in new orders compared to that of output, backlogs of work increased further in November. The level of outstanding business rose for the sixteenth consecutive month and at a solid pace that matched that seen in October. Panellists linked higher amount of incomplete orders to labour and raw material shortages, alongside the sustained rise in new business.
STOCKS OF FINISHED GOODS
The seasonally adjusted Stocks of Finished Goods Index signalled an expansion in inventory levels in November, following a two-month sequence of decline. A number of surveyed firms mentioned raising their post-production inventories in response to a further rise in new order book volumes.
U.S. goods producers registered a strong rise in employment during November, despite the rate of job creation easing slightly from October's recent peak. Nonetheless, the rise in staffing levels was the second-fastest in the year-to-date. Anecdotal evidence generally linked the increase in workforce numbers to greater production requirements.
Average factory gate prices charged by goods producers increased for the twenty-sixth consecutive month in November. Although the rate of inflation softened from October, it was still above the series trend. Where a rise was reported, panellists linked this to the pass-through of higher costs to clients.
Cost burdens faced by manufacturers continued to rise in November, extending the current sequence of inflation that began in April 2016. Anecdotal evidence suggested higher input prices were due to greater raw material costs, stemming from greater demand for inputs and tariffs. Although the rate of inflation softened to a nine-month low, it was marked nonetheless.
SUPPLIERS’ DELIVERY TIMES
Vendor performance continued to deteriorate across the U.S. manufacturing sector in November. Although lead times lengthened to the least marked extent since February, the deterioration remained sharp. Where panellists noted longer lead times, many linked this to higher demand for inputs and resulting supplier shortages. Some continued to report stockpiling activity among manufacturers in anticipation of further tariff related price rises had also added pressure to supply chains.
QUANTITY OF PURCHASES
Buying activity at U.S. manufacturing firms increased strongly in November, despite the rate of expansion moderating for the second month running. Panellists linked the rise in purchasing activity to a further upturn in new orders and efforts to clear backlogs.
STOCKS OF PURCHASES
The seasonally adjusted Stocks of Purchases Index indicated an eighteenth successive monthly increase in pre-production inventories in November. The upturn in stock levels was widely attributed to anticipations of further new order growth and stockpiling activity due to expectations of further input price rises. That said, the rate of accumulation was the weakest since April and only slight.
Business confidence eased in November and was well below the long-run series average. Optimism was often linked to more favourable demand conditions and new product development. Others, however, expressed concerns around how client demand will fare in the months ahead. Notably, the degree of optimism was the weakest since September 2017.
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