U.S. Manufacturing PMI Dips in February
March 5, 2019 | IHS MarkitEstimated reading time: 6 minutes
February data signalled a softer, but still solid, improvement in operating conditions across the U.S. manufacturing sector. The headline PMI slipped to its lowest since August 2017 amid slower expansions in output and new orders. Notably, the increases were slower than their respective long-run trends, with growth rates dipping to 17- and 20-month lows, respectively. Meanwhile, foreign client demand continued to rise marginally. A sustained upturn in new orders led to a further rise in employment, with backlogs also increasing.
At the same time, inflationary pressures softened in February. Rates of both input price and output charge inflation eased from January, with the former edging down to an 18-month low.
The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 53.0 in February, down from 54.9 at the start of the year. Midway through the first quarter of 2019, manufacturing firms indicated a solid, albeit softer, improvement in the health of the sector, with the index registering its lowest for 18 months.
Production increased further in February, albeit at a slower pace. Panellists reported that the upturn stemmed from a sustained expansion in new business and efforts to clear backlogs. That said, the rise in output was modest overall, with growth the softest since September 2017 and below the long-run trend.
Similarly, new business received by manufacturers expanded at a slower rate in February. The modest upturn was the weakest since June 2017. Although panellists stated that firmer client demand drove the latest increase, some firms noted that longer lead times were pushing clients to find alternatives. Foreign client demand, however, continued to increase. Though marginal, the rise in new export orders quickened since January.
On the price front, input cost inflation eased to an 18-month low in February. The increase in purchasing prices was nevertheless sharp, reflecting higher raw material costs and tariffs. Factory gate prices rose solidly, albeit at the second-slowest rate since December 2017.
The rate of job creation was faster than the series trend in February, with firms raising their workforce numbers solidly. Pressure on capacity was exhibited by another monthly rise in backlogs of work. Although only fractional, the latest increase extends the current sequence of order book accumulation to 19 months.
A slower rise in new business reportedly led to softer growth in buying activity. Growth in pre-production inventories also eased in February as stocks of inputs were used in production.
Finally, expectations towards the one-year outlook for output remained positive in February. Panellists were buoyed by forecasts of further upturns in new business. That said, the degree of confidence slipped to the second-lowest since November 2016 (behind December 2018).
Commenting on the PMI data, Chris Williamson, chief business economist at IHS Markit said:
"The PMI indicates the US manufacturing sector is growing at its weakest rate for one and a half years, with firms reporting a marked easing in production growth in February, linked to a similar slowdown in order book growth.
“The survey exhibits a strong advance correlation with comparable official data, and suggests that factory production and orders growth rates are close to stalling mid-way through the first quarter, albeit in part representing some pay-back after a strong January. Export markets remained the principal drag on order books.
“Having seen demand grow faster than production through much of 2018, order book and output trends have come back into line in recent months, hinting at an alleviation of capacity constraints as demand cools. Backlogs of works barely rose as a result, and price pressures have likewise moderated, though tariffs were again reported to have pushed costs higher. Hiring has consequently also slowed.
“Worries regarding the impact of tariffs and trade wars, alongside wider political uncertainty, undermined business confidence, with expectations of future growth running at one of the most subdued levels seen for over two years and suggesting downside risks prevail for coming months.”
Page 1 of 2
Suggested Items
I-Connect007 Editor’s Choice: Five Must-Reads for the Week
05/10/2024 | Marcy LaRont, PCB007 MagazineSpring is a renewal each year as dormant flora bloom, and baby ducklings and geese are ever present in local bodies of water. Even though it is beginning to get hot, I love this time of year in Arizona, with the sun waking me around 5 a.m. It fills me with an energy that I often lose in the dark winter months. Wherever you find yourself in the world, I hope you are enjoying Spring and that you are filled with energy and enthusiasm for all the great work part of our daily lives in this industry.
ViTrox Presents Next-Gen Intelligent Manufacturing Solutions at SEMICON Southeast Asia 2024
05/10/2024 | ViTroxViTrox, which aims to be the world’s most trusted technology company, is pleased to announce its participation as an exhibitor and Platinum sponsor at SEMICON Southeast Asia 2024! Join us from May 28-30 at Booth #1504 in Malaysia International Trade and Exhibition Centre (MITEC), KL, to experience our advancement in technology and manufacturing.
Podcast Review: On the Line with… Designing for Reality
05/09/2024 | Duane Benson, Positive Edge LLCAs a technologist, if I were forced to come up with just one recurring theme that I might call a professional “nemesis,” it would be the difference between theory and reality. A lot of technology we have at our disposal works well in theory but falls short when reality hits. That’s not the only reason I chose to listen to and review On the Line with… Designing for Reality, featuring a series of conversations with ASC Sunstone’s Matt Stevenson, but it certainly helped that the title caught my eye.
NEOTech Positions Itself as Microelectronics Industry Leader with High-Technology Investments
05/09/2024 | NEOTechNEOTech, a leading provider of electronic manufacturing services (EMS), design engineering, and supply chain solutions in the high-tech industrial, medical device, and aerospace/defense markets, announces a significant investment in acquiring new Palomar 8100 wire bonder machines, enhancing the company’s positioning as a leader of cutting-edge microelectronics assemblies for mission-critical applications.
MKS’ Atotech, ESI to Participate in CPCA Show
05/09/2024 | MKS’ AtotechMKS’ Atotech, and ESI will participate in the CPCA Show 2024. The show will be held from May 13 to 15, 2024, at the National Exhibition and Convention Center (Shanghai) and will bring together domestic and international manufacturers in the electronic circuit industry.