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US Manufacturing PMI hits five-month high in March

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US Manufacturing PMI hits five-month high in March

Largest rise in PMI since October 2014.

US manufacturers indicated a strong end to the first quarter of 2015, with output, new business and employment all rising at an accelerated pace in March.

As a result, the seasonally adjusted Markit Flash US Manufacturing Purchasing Managers’ Index  picked up to 55.3 in March, up from 55.1 in February and well above the neutral 50.0 threshold. The latest reading signaled the strongest overall improvement in manufacturing business conditions since October 2014.

March data pointed to a steep expansion of manufacturing production volumes, with the latest upturn the fastest for six months. Anecdotal evidence cited improving demand from domestic clients, successful new product launches and, in some cases, a catch-up effect following disruptions related to adverse weather earlier in the year.

“However, the rate of expansion in manufacturing clearly remains well below the peaks seen last year."

Manufacturing new order levels increased at a robust and accelerated pace in March, driven by improving economic conditions and positive overall spending patterns among clients. The latest rise in incoming new work was the fastest for five months, but still less marked than the average for 2014 as a whole. Some manufacturers commented that weak demand from clients in the oil industry remained a factor weighing on new business gains, while a number of firms also pointed to softer export sales.

The latest survey indicated a decline in new work from abroad for the first time in four months, which survey respondents mainly linked to competitive pressures and the impact of the strong dollar/euro exchange rate.

Resurgent output and new business growth contributed to a further upturn in manufacturing payroll numbers during March. Higher levels of employment have now been recorded for 21 months in a row, and the latest increase was the fastest since last November. Additional staff hiring also reflected renewed pressures on operating capacity, as highlighted by the sharpest rise in backlogs of work for six months in March.

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit, said “Manufacturing regained further momentum from the slowdown seen at the turn of the year, with output, new orders and employment growth all accelerating in March.

“While economic growth looks set to disappoint again in the first quarter, with GDP set to rise by a rate perhaps slightly below the 2.2% expansion seen in the fourth quarter of last year, the upturn in order books in particular gives some reassurance that the pace of economic growth is likely to pick up as we move towards the summer.

“However, the rate of expansion in manufacturing clearly remains well below the peaks seen last year, which is largely the result of exporters struggling in the face of a strong dollar. The March survey showed exports dropping for the first since November.

“But the appreciation of the dollar is not all bad news. The greenback’s strength is lowering import prices, which in turned helped drive down manufacturing costs at one of the fastest rates since mid-2012. Lower inflationary pressures should help keep interest rates low for longer.”

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