The U.S. manufacturing sector experienced a subdued month in May, with growth slowing in output, new orders and employment. Optimism, however, is at its strongest level since February.
According to IHS Markit, the U.S. Manufacturing Purchasing Managers’ Index (PMI) reached a score of 52 for June, down from 52.7 in May, indicating the least-marked improvement in business conditions since September 2016. The main factors weighing on the index were slower output rates and new business growth.
“Manufacturers reported a disappointing end to the second quarter, with few signs of growth picking up any time soon,” said Chris Williamson, chief business economist at IHS Markit. “The PMI has been sliding lower since the peak seen in January and the June reading points to a stagnation—at best—in the official manufacturing output data.”
Manufacturing production has increased since last June, but the rate of expansion was modest and reached a nine-month low in the past month, Markit said. Softer new business growth was a check on production schedules. New order books improved in June, but the increase was the weakest since September of last year. Cost pressures were the weakest in 15 months, resulting in the slowest pace of factory gate (the actual cost of manufacturing goods before any markup is added to give profit) price inflation since late 2016. The sector has seen four years of sustained employment growth, though the pace of job creation was at its lowest since March, according to Markit.
“Forward-looking indicators—notably a further slowdown in inflows of new business to a nine-month low and a sharp drop in the new orders-to-inventory ratio—suggest that the risks are weighted to the downside for coming months,” Williamson said.
– Adam Fusco, associate editor