U.S. manufacturing output estimates showed worrying signs for this segment of the economy today as it fell for the first time since September 2009, while new orders expanded at the slowest rate so far this year.
“The weak manufacturing PMI data cast doubt on the ability of the U.S. economy to rebound from its disappointing start to the year in the second quarter,” said Chris Williamson, chief economist at Markit Economics. Many firms monitored by Markit said uncertainty about the economy led clients to delay spending, prompting firms to cut production schedules.
The Markit Flash U.S. Manufacturing Purchasing Managers’ Index now tracks at 50.5, down from April’s 50.8 reading and barely above the neutral level of 50, Markit said. The reading was dragged down by a renewed fall in production, weakened new order growth and more cuts to input stocks. Also, reduced foreign client demand slowed overall new orders from U.S. manufacturers as new export sales fell for the second consecutive month.
Outstanding manufacturing work fell for the fourth month in a row in May, as the rate of backlog depletion remained unchanged from April, Williamson said. Stocks of inputs decreased for the sixth consecutive month, while inventories of finished items increased marginally after April’s slight reduction.
Further, “Any uplift in prices was largely due to higher commodity prices, notably oil. Core price pressures look to have been once again subdued by weak demand,” he said. “The survey is signaling that manufacturing will act as a drag on economic growth in the second quarter, leaving the economy once again dependent on the service sector, and consumers in particular, to sustain growth.”
- Nicholas Stern, editorial associate