New orders return to growth territory in June
Key findings:
- Modest upturns in output and new business
- Employment expands at slowest rate since August 2016
- Inflationary pressures remain muted
June data signalled a further near-stagnation of operating
conditions across the U.S. manufacturing sector. The rate of
overall growth held close to May's near-decade low. On a positive
note, the rate of output growth quickened slightly amid a renewed
rise in new orders. However, in line with muted increases in
output, firms reined in staff hiring, expanding workforce numbers
at the slowest pace for almost three years. Subsequently, output
expectations remained subdued.
On the price front, inflationary pressures remained muted
despite slight accelerations in rates of output charge and input
price inflation.
The seasonally adjusted IHS Markit final U.S. Manufacturing
Purchasing Managers’ Index™ (PMI™) posted 50.6 in June, broadly in
line with 50.5 in May, to signal only a marginal improvement in the
health of the U.S. manufacturing sector. The latest headline
reading picked up from the recently released June 'flash' PMI
figure (50.1), but was nonetheless the second-lowest figure since
September 2009.
Supporting the headline number was a renewed rise in new
business in June. The upturn was linked by panellists to the
acquisition of new clients. That said, the rate of increase was
only modest overall and among the slowest seen over the last three
years. In contrast, the pace of growth in new business from abroad
was the quickest in 2019 so far, following a slight fall in
May.
Consequently, manufacturers registered a faster rise in
production in June. Nevertheless, the rate of expansion was only
moderate and the second-slowest since June 2016 (behind May's
recent low), as firms continued to report difficult demand
conditions.
Uncertainty surrounding future output growth weighed on hiring
decisions among goods producers, with the rate of job creation
softening to the least marked since August 2016. Expectations of
production growth over the coming year remained solemn and among
the weakest in the survey history in June. Manufacturing firms
often raised concerns surrounding tariffs and the softer trend in
new orders.
Meanwhile, cost burdens faced by manufacturers continued to rise
at a historically muted rate in June. Higher input prices were
attributed to the ongoing effects of tariffs on raw material
purchases. However, some firms stated that hikes in costs were less
marked compared to earlier in the year.
Subsequently, output charges increased at only a modest rate.
Some firms partly passed on costs to clients, whereas others
highlighted the importance of discounting efforts in order to
attract and retain clients.
In line with muted demand conditions, firms continued to deplete
their stocks. Notably, pre-production inventories fell at the
quickest rate since the start of 2014 as input buying rose only
fractionally.
Commenting on the PMI data, Chris Williamson, Chief Business
Economist at IHS Markit said:
“US manufacturers reported business conditions to have remained
the toughest for nearly a decade in June. The past two months have
seen the lowest readings since the height of the global financial
crisis in 2009.
“The survey provides accurate advance indicators of comparable
official data, and paints a worrying picture of marked declines in
both output and jobs. The June survey sub-index readings are
consistent with manufacturing output contracting at a quarterly
rate of 0.7% and factory payrolls falling by 18,000.
“A major development in recent months has been the deteriorating
performance of larger companies, where the last two months have
seen the lowest PMI readings for a decade. After inventories rose
sharply earlier in the year, large companies have moved to
destocking in May and June amid a sharp slowing in new order
inflows.
“Although business optimism about the future lifted slightly
higher, it remained close to survey lows to indicate persistent low
morale. Worries centred on signs of slowing demand both at home and
internationally, weaker sales, and geopolitical uncertainty.
“Tariffs meanwhile continued to push up prices, but weak demand
often limited the ability of firms to pass higher prices onto
customers, suggesting overall inflationary pressures have weakened
compared to earlier in the year.”
Methodology
The IHS Markit US Manufacturing PMI™ is compiled by IHS Markit
from responses to questionnaires sent to purchasing managers in a
panel of around 750 manufacturers. The panel is stratified by
detailed sector and company workforce size, based on contributions
to GDP. Survey responses are collected in the second half of each
month and indicate the direction of change compared to the previous
month. A diffusion index is calculated for each survey variable.
The index is the sum of the percentage of ‘higher’ responses and
half the percentage of ‘unchanged’ responses. The indices vary
between 0 and 100, with a reading above 50 indicating an overall
increase compared to the previous month, and below 50 an overall
decrease. The indices are then seasonally adjusted. The headline
figure is the Purchasing Managers’ Index™ (PMI). The PMI is a
weighted average of the following five indices: New Orders (30%),
Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and
Stocks of Purchases (10%). For the PMI calculation the Suppliers’
Delivery Times Index is inverted so that it moves in a comparable
direction to the other indices. Underlying survey data are not
revised after publication, but seasonal adjustment factors may be
revised from time to time as appropriate which will affect the
seasonally adjusted data series. June 2019 data were collected
12-24 June 2019. For further information on the PMI survey
methodology, please contact economics@ihsmarkit.com. Data
collection began in April 2004 from a survey panel of electronic
goods manufacturers. In May 2007, the panel was expanded to cover
manufacturers of metal products. In October 2009, the panel was
expanded further to cover the entire manufacturing sector.
Historical data between May 2007 and September 2009 are compiled
from responses collected from manufacturers of electronic goods and
metal goods, while data from October 2009 are compiled from
responses collected from the full manufacturing panel.
About IHS Markit
IHS Markit (Nasdaq: INFO) is a world leader in critical
information, analytics and solutions for the major industries and
markets that drive economies worldwide. The company delivers
next-generation information, analytics and solutions to customers
in business, finance and government, improving their operational
efficiency and providing deep insights that lead to well-informed,
confident decisions. IHS Markit has more than 50,000 business and
government customers, including 80 percent of the Fortune Global
500 and the world’s leading financial institutions.
IHS Markit is a registered trademark of IHS Markit Ltd. and/or
its affiliates. All other company and product names may be
trademarks of their respective owners © 2019 IHS Markit Ltd. All
rights reserved.
About PMI
Purchasing Managers’ Index™ (PMI™) surveys are now available for
over 40 countries and also for key regions including the eurozone.
They are the most closely watched business surveys in the world,
favoured by central banks, financial markets and business decision
makers for their ability to provide up-to-date, accurate and often
unique monthly indicators of economic trends. To learn more go to
ihsmarkit.com/products/pmi.html.
Disclaimer
The intellectual property rights to the data provided herein are
owned by or licensed to IHS Markit. Any unauthorised use, including
but not limited to copying, distributing, transmitting or otherwise
of any data appearing is not permitted without IHS Markit’s prior
consent. IHS Markit shall not have any liability, duty or
obligation for or relating to the content or information (“data”)
contained herein, any errors, inaccuracies, omissions or delays in
the data, or for any actions taken in reliance thereon. In no event
shall IHS Markit be liable for any special, incidental, or
consequential damages, arising out of the use of the data.
Purchasing Managers’ Index™ and PMI™ are either registered trade
marks of Markit Economics Limited or licensed to Markit Economics
Limited. IHS Markit is a registered trademark of IHS Markit Ltd.
and/or its affiliates.
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version on businesswire.com: https://www.businesswire.com/news/home/20190701005608/en/
Chris Williamson Chief Business Economist T: +44-20-7260-2329
chris.williamson@ihsmarkit.com Siân Jones Economist T:
+44-1491-461-017 sian.jones@ihsmarkit.com Katherine Smith Corporate
Communications T: +1 (781) 301-9311
katherine.smith@ihsmarkit.com
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