Home | Growth | US manufacturing activity drops to its lowest level since October 2013

US manufacturing activity drops to its lowest level since October 2013

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A number of firms suggested that additional staff hiring had helped reduce pressure on operating capacity at their plants. Job creation has now accelerated in three of the past four months, with the latest upturn in manufacturing payroll numbers the fastest since November 2014.

Average cost burdens increased for the second month running in June, which contrasted with falling input prices earlier in the year. However, the rate of cost inflation was only modest and well below the long-run survey average. Meanwhile, factory gate price inflation remained marginal and eased slightly since May. Survey respondents suggested that higher input costs had only contributed to gradual rises in their average prices charged in recent months, in part reflecting strong competition for new work.

Chris Williamson, Chief Economist at Markit, warned that the PMI results might signal a slow-down in momentum in the US economy.

“Manufacturers reported a disappointing end to the second quarter, with factory output growing at the slowest rate for a year-and-a-half.

“While the survey data points to the economy rebounding in the second quarter, the weak PMI number for June raises the possibility that we are seeing a loss of momentum heading into the third quarter.

“The slowdown is being led by deteriorating export performance, which many producers in turn linked to a loss of competitiveness caused by the stronger dollar. Although stabilizing in June after declining in April and May, export orders have not shown any growth since February.

“The survey results will add to further worries about the damaging impact of the strong dollar, and encourage the Fed to be cautious in terms of the timing the first interest rate hike. While a September rise still looks likely, given the ongoing strength of the service sector, any further deterioration in the data are likely to push the first hike into next year.”

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