Markit U.S. Manufacturing PMI: Weakest Upturn in Business Conditions

Estimated reading time: 1 minute

Key points:

• Manufacturing PMI falls to 51.2, its lowest level since October 2012
• Slower rates of output and new business growth
• Input costs decline again in December Markit U.S. Manufacturing PMI (seasonally adjusted)       

Summary

U.S. manufacturers ended the year by recording the weakest improvement in overall business conditions since October 2012. This was highlighted by a fall in the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) to 51.2, down from 52.8 in November. Although still above the neutral 50.0 threshold, the latest reading was much weaker than the survey average (54.2) and pointed to only a marginal upturn in operating conditions.  

A near-stagnation in new business volumes was the main factor weighing on the headline index in December. Measured overall, new order levels expanded only fractionally and at the weakest pace since September 2009. Anecdotal evidence cited softer underlying demand conditions, intense competition for new work and subdued business confidence among clients. Export sales were also close to stagnation in December, with manufacturers noting that the strong dollar continued to act as a drag on demand from abroad. 

Manufacturing production growth moderated in response to weaker than expected new business intakes during December. The latest expansion of output levels was the least marked since October 2013. At the same time, capacity pressures eased in December, with backlogs of work decreasing at the fastest pace since September 2009. Nonetheless, payroll numbers rose at a solid rate that was slightly faster than seen during the previous month. This marked two-and-a-half years of sustained job creation across the manufacturing sector, and the pace of expansion was close to the average seen over this period.   December data indicated a softer increase in purchasing activity across the manufacturing sector. Higher levels of input buying have been recorded in each month since November 2013, but the latest rise was the weakest over this period. Survey respondents noted that slower new business growth had contributed to more cautious input buying and efforts to streamline stocks. Reflecting this, preproduction inventories decreased for the first time in a year-and-a-half during December.  

Input prices continued to fall during the latest survey period, with the rate of decline accelerating slightly since November. Manufacturers commented on falling costs for a range of raw materials, particularly steel. However, factory gate charges rose for the third month running. Although only modest, the rate of output charge inflation picked up to its fastest since August.