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US manufacturing activity drops to its lowest level since October 2013

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US manufacturing activity drops to its lowest level since October 2013

Output growth slows for the third month running.

According to economic data provider Markit, US manufacturing activity in June declined to its lowest level since October 2103.

The Markit Flash U.S. Manufacturing PMI came in at 53.4 in June, down from 54.0 in May.  The PMI was still above the neutral 50.0 threshold, but slightly below its average since the recovery began in late-2009 (54.3). Softer output growth was a principal factor behind the decline in the headline index during June.

In contrast, new business growth picked up slightly from May’s 16-month low and job creation accelerated to its strongest since November 2014. The latest expansion of production volumes was the weakest recorded by the survey since January 2014. Some manufacturers cited greater efforts to fulfil orders from inventories in June, as highlighted by the first reduction in stocks of finished goods since December 2014. Moreover, there were reports that softer output growth reflected a degree of caution about the business outlook, as well as concerns about the impact of the strong dollar on competitiveness.

“The slowdown is being led by deteriorating export performance."

Although new orders from abroad stabilized in June, this followed declines in export sales during each of the previous two months. Meanwhile, overall volumes of new work expanded at a solid pace in June, but the latest upturn was still the second-slowest since January 2014.

Improving U.S. economic conditions were cited as a factor supporting new business gains in June. However, some manufacturers noted that sharp declines in investment spending within the energy sector had weighed on new order volumes. Higher overall levels of new work contributed to rising volumes of unfinished business in June, but the rate of backlog accumulation remained only marginal.

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