IHS Markit US Manufacturing PMI: 54.9 in January

Estimated reading time: 5 minutes

Production across the manufacturing sector continued to increase sharply in January. The rate of output growth accelerated to the fastest for four months. Where a rise was reported, panellists linked this to a strong start to 2019 and greater client demand. Others suggested increased efforts to clear backlogs supported the upturn in output.

New Orders

Goods producers registered a sharp rise in new order book volumes in January, with the rate of growth accelerating from that seen in December. The upturn was historically strong and commonly attributed to new client acquisitions and more favourable demand conditions.

New Export Orders

Adjusted for seasonal factors, the New Export Orders Index signalled only a marginal increase in new business from abroad in January. New export orders rose for the sixth successive month, but at the slowest rate since last October. Despite reports of stronger foreign client demand, a number of survey respondents noted that export demand was becoming increasingly sporadic and irregular.

Backlogs of Work

The level of outstanding business at U.S. manufacturing firms continued to increase in January. Anecdotal evidence suggested that strain was placed on capacity following a sustained rise in new orders. Although the rate of backlog accumulation was below those seen in the latter half of 2018, it was above the series long-run trend.

Stocks of Finished Goods

Post-production inventories fell for the second successive month in January, albeit at only a fractional rate. Nonetheless, stocks have now declined in four of the past five months. Panellists suggested that the fast shipment of finished goods led to the decrease in stock levels.

Employment

Employment growth picked up in January, with manufacturers registering a strong rise in workforce numbers. The accelerated rate of job creation was linked to increased new work. The upturn in staffing numbers was faster than the series trend.

Output Prices

Average prices charged by manufacturers increased further at the start of 2019. The rise in output charges was strong and the quickest since last October. A number of survey respondents attributed higher factory gate prices to the pass-through of larger cost burdens, especially for metal products.

Input Prices

The rate of input price inflation remained historically sharp in January, despite dipping to a 12-month low. Panellists continued to state that tariffs on steel and aluminium were driving prices higher, whilst others noted that strong demand for inputs pushed cost burdens up.

Suppliers’ Delivery Times

Supplier delivery times continued to lengthen in January, extending the current trend of deterioration in vendor performance that began in January 2017. Panellists stated that pressure on supplier capacity led to longer lead times. That said, the deterioration in supplier performance was the least marked since December 2017.

Quantity of Purchases

The seasonally adjusted Quantity of Purchases Index signalled a further rise in buying activity across the U.S. manufacturing sector. The upturn in input purchasing was the fastest for three months and strong overall. Anecdotal evidence suggested that larger new order volumes and efforts to restock were behind the latest rise in buying activity.

Stocks of Purchases

Adjusted for seasonal factors, the Stocks of Purchases Index indicated a further increase in pre-production inventories. Though modest, the rate of stock accumulation was the fastest since last September. A number of firms expanded their inventories to accommodate the sustained rise in new business.

Future Output

Business expectations regarding the year ahead remained optimistic in January. Manufacturing firms registered the highest degree of confidence since last October amid new client acquisitions and further anticipated new order growth. That said, the level of positive sentiment remained below the series trend.

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