March U.S. Manufacturing PMI Dips to Lowest Since June 2017
April 2, 2019 | IHS MarkitEstimated reading time: 6 minutes
The latest PMI signaled a moderate improvement in operating conditions across the U.S. manufacturing sector in March, dropping to its lowest level since mid-2017 amid softer increases in output and new orders. Nonetheless, the rate of job creation remained solid despite broadly unchanged levels of outstanding business. Meanwhile, cost pressures eased further as the rate of input price inflation softened for the fifth successive month. Output charges also rose at a slower pace.
The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 52.4 in March, down from 53.0 in February, and broadly in line with the 'flash' figure of 52.5. The moderate improvement in the health of the manufacturing sector was the weakest since June 2017 and notably softer than the trend seen for 2018. Moreover, the first quarter average of 2019 was the lowest since the third quarter of 2017.
A key factor behind the lower headline figure was a slower rise in output. The rate of expansion eased to a marginal pace that was the weakest since June 2016 and below the series trend. Panellists stated that the slower increase in production was due to softer underlying client demand.
Similarly, new business growth eased in March. Total new orders expanded at a modest pace that was the slowest since June 2017. At the same time, new export orders rose at only a marginal rate that was the weakest for five months, with firms noting that global trade tensions and the ongoing impact of tariffs had dampened foreign client demand.
In line with less marked growth in new orders, panellists registered the softest rise in input purchasing since June 2016. Where an increase was reported, companies often linked this to the replenishment of stocks. Meanwhile, both pre- and post-production inventories rose in March.
On the price front, input price inflation softened further to the slowest since August 2017. Where a rise in costs was reported, goods producers linked this to higher raw material prices, stemming from the ongoing impact of tariffs and greater demand for inputs. The increase was partly passed on to clients through higher output charges. The rise in factory gate prices was nevertheless the slowest since December 2017.
Backlogs of work were broadly unchanged in March, albeit with the index dipping very marginally below the 50.0 no change mark for the first time since July 2017. Nonetheless, employment rose at a solid rate. A number of firms stated that there were further vacancies to fill, but that they were having difficulties finding skilled or suitable candidates.
Business confidence among manufacturers remained below the series trend but picked up from February. The solid degree of optimism was attributed to new product development and efforts to increase productivity.
Commenting on the PMI data, Chris Williamson, chief business economist at IHS Markit said:
"A further deterioration in the manufacturing PMI suggests the factory sector is acting as an increasing drag on the US economy. The March survey is consistent with production falling at a quarterly rate of 0.6% according to historical comparisons with official data.
“Encouragingly, companies report that at least some of the slowdown is due to capacity constraints, notably in terms of skill shortages. One-in-three companies reporting a drop in headcounts cited an inability to fill vacancies. Those looking for positive signals will therefore note that hiring remained encouragingly solid during the month and expectations of future output perked up, albeit still running below levels seen this time last year.
“However, things may well get worse before they get better, as the forward-looking indicators are a cause for concern. New order growth has fallen close to the lows seen in the 2016 slowdown, often linked to disappointing exports, tariffs and signs of increasing caution among customers. The ratio of new orders to existing inventory has meanwhile fallen to its lowest since June 2017, suggesting the production trend may weaken further in April.”
Output
U.S manufacturers signalled a softer expansion of production in March, with the rate of growth easing for the second month running. Notably, the pace of increase was the slowest since June 2016, which firms partly attributed to softer client demand. Small, medium and large-sized firms all registered weaker rises in output.
New Orders
New business received by U.S manufacturing firms rose further in March, though the rate of growth eased further from January. Where a rise in new orders was reported, panellists linked this to greater demand from new and existing clients. Nonetheless, the pace of expansion was only moderate overall and the softest since June 2017.
New Export Orders
New export orders placed at U.S manufacturing firms increased for the eighth successive month in March. The latest rise in export business was attributed by some firms to strong client demand, however, others noted that the ongoing impact of tariffs and global trade tensions had dampened demand conditions. Furthermore, the rate of growth eased to a five-month low and was only marginal overall.
Page 1 of 2
Suggested Items
IMI Welcomes New CEO
05/03/2024 | IMIIntegrated Micro-Electronics, Inc. (IMI),The IMI Board of Directors announced, in a disclosure dated April 25, 2024, the appointment of Louis Sylvester Hughes, Chief Executive Officer (CEO).
Benchmark Reports Q1 2024 Results
05/03/2024 | PRNewswireRevenue decreased quarter over quarter and year over year primarily due to decreases in Medical, Advanced Computing and Next-Generation Communication sales, which were partially offset by an increase in Complex Industrials sales quarter-over-quarter and increases in Semi-Cap and A&D sales year-over-year.
Ansys Announces Q1 Financial Results
05/03/2024 | ANSYSANSYS, Inc. reported first quarter 2024 revenue of $466.6 million, a decrease of 8% in reported and constant currency, when compared to the first quarter of 2023.
SCHMID Group Closes Business Combination, Begins Trading on NASDAQ
05/02/2024 | SCHMID GroupGebr. SCHMID GmbH, a global solutions provider for the high-tech electronic, photovoltaics, glass, and energy systems industries, and Pegasus Digital Mobility Acquisition Corp. announced the completion of their business combination.
Sanmina's Second Quarter Fiscal 2024 Financial Results
05/02/2024 | Sanmina Corp.Sanmina Corporation, a leading integrated manufacturing solutions company, today reported financial results for the fiscal second quarter ended March 30, 2024 and outlook for its fiscal third quarter ending June 29, 2024.