US Manufacturing PMI Slips to 15-month Low in December
January 3, 2019 | Business WireEstimated reading time: 6 minutes
Production across the U.S. manufacturing sector increased solidly in December, and at a rate that matched that seen in November. Panellists widely linked the latest expansion to greater new order volumes. That said, the upturn was the joint-weakest since September 2017.
New Orders
New orders received by goods producers rose further in December, although the rate of expansion softened for the first time in four months. Notably, the rate of growth was the slowest since September 2017 and dipped below the series trend. Where an increase was reported, panellists attributed this to greater new order inflows from new client wins.
New Export Orders
In contrast to the trend for new orders, new business from abroad increased at a faster pace in December. This also extended the current sequence of expansion to five months. Anecdotal evidence attributed the rise to stronger foreign client demand. Although only moderate, the upturn was the fastest since January.
Backlogs of Work
The level of work-in-hand at U.S. manufacturers continued to increase in December, further extending the current sequence of growth that began in August 2017. A number of monitored firms suggested that greater new order inflows and a further deterioration in vendor performance contributed to the latest rise in backlogs.
Stocks of Finished Goods
The seasonally adjusted Stocks of Finished Goods Index dipped below the 50.0 no change mark for the third time in the last four months in December. The marginal decline in post-production inventories was linked by panellists to delays in the receipt of inputs and the fast shipment of finished goods.
Employment
Workforce numbers continued to grow across the U.S. manufacturing sector in December. Where an increase in staffing levels was registered, some firms attributed this to efforts to clear backlogs following a sustained rise in new business. That said, others noted that the retention of employees was low, which meant the overall rate of job creation eased to the weakest in eighteen months.
Output Prices
Average output charges set by goods producers rose at a solid rate in December. The increase in selling prices was generally attributed to the pass-through of higher costs to clients. That said, the rate of inflation softened for the second successive month and was the slowest in 2018.
Input Prices
Input price inflation softened in December, but remained sharp overall. Where a rise in purchasing costs was reported, panellists linked this to increased demand for inputs following expectations of further price increases, the ongoing impact of tariffs and shortages of electronics components. Overall, the rate of input price inflation eased to an eleven-month low, but remained above the survey average.
Suppliers’ Delivery Times
Suppliers' delivery times continued to lengthen in December. Longer lead times were widely attributed to supplier capacity constraints and greater demand for inputs which partly stemmed from stockpiling activity among some firms in expectation of further tariffs and input price rises. That said, the extent to which vendor performance deteriorated was the least marked since January.
Quantity of Purchases
Purchasing activity among goods producers rose again in December, extending the current trend of expansion that began in May 2016. Increases in input buying were attributed by panellists to greater new order volumes and efforts to stockpile inputs. In line with the trend for new business, however, the rate of growth softened. Furthermore, the upturn was the weakest in a year-and-a-half.
Stocks of Purchases
Stocks of purchases held by U.S. manufacturers increased for the nineteenth successive month in December. The marginal rise in pre-production inventories was attributed to greater client demand and increased efforts to stockpile following further delays in supplier deliveries.
Future Output
Output expectations for the year ahead deteriorated in December, with the level of sentiment among the weakest seen in the series history. While optimism stemmed from a sustained rise in new business, others expressed concerns surrounding the longevity of increased client demand. Moreover, the level of business confidence was the lowest since October 2016.
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