PMI rises to six-month high in October
Key findings:
- Modest improvement in operating conditions as PMI rises to
51.3
- Faster upturns in output, new orders and employment
- Output prices broadly unchanged
The U.S. manufacturing sector saw a further modest improvement
in operating conditions in October, supported by faster expansions
in output and new business. Rates of growth in both production and
new orders accelerated to six-month highs. Subsequently, employment
rose at the quickest pace since May and business confidence picked
up to a four-month high. Meanwhile, rates of input price and output
charge inflation softened and remained subdued, with selling prices
broadly unchanged during the month.
The seasonally adjusted IHS Markit final U.S. Manufacturing
Purchasing Managers’ Index™ (PMI™) posted 51.3 in October, up
slightly from 51.1 in September. The latest headline figure was the
highest since April, but remained consistent with only a modest
improvement in the health of the manufacturing sector. The overall
rate of growth remained well below the long-run series average.
Supporting the improvement in the PMI was a faster rise in
production in October. Although still moderate, the rate of
expansion in output accelerated to a six-month high and was
accompanied by a quicker upturn in new business.
New orders across the manufacturing sector increased for the
fifth consecutive month and the rate of growth quickened to the
fastest since April. Firms noted that their clients were exhibiting
less hesitancy in placing orders and market conditions had
improved. Foreign demand also ticked up following three successive
monthly contractions in new export orders, with new business from
abroad rising marginally overall.
On the price front, cost burdens rose at only a modest pace at
the start of the fourth quarter. Although some firms reported
higher input prices stemming from the ongoing impact of tariffs,
many suggested that subdued price pressures were often linked to
price drops at suppliers, notably for metals.
Subsequently, average factory gate charges across the
goods-producing sector were broadly unchanged as manufacturers only
partly passed on higher costs to clients.
At the same time, greater production requirements contributed to
the fastest rise in workforce numbers since May. Some firms also
noted that higher staffing levels were due to the filling of
previously held vacancies. Backlogs, however, were unchanged in
October following a three-month sequence of decline.
In line with stronger client demand, manufacturers registered a
greater degree of confidence in output growth over the coming year.
More favourable market conditions partially drove optimism to its
highest level since June. Nonetheless, the overall degree of
sentiment was below the long-run series trend.
Finally, despite a renewed rise in input buying, the stronger
increase in new business meant firms increasingly dipped into
stocks to ensure new orders were fulfilled in a timely manner.
Therefore, pre-production inventories fell at the quickest rate for
three months and stocks of finished goods decreased slightly.
Commenting on the PMI data, Chris Williamson, Chief Business
Economist at IHS Markit said:
"Tentative signs of renewed vigor are appearing in the US
manufacturing sector, with the survey’s production gauge having now
risen for three successive months to suggest that the soft patch
bottomed out in July. Growth of new orders hit a six-month high,
fuelled in part by a renewed increase in exports, prompting
producers to take on more staff, with payroll numbers rising at the
quickest pace since May.
"The improvement in current conditions was matched by a lifting
of business optimism about the year ahead to the highest seen since
June. It was also encouraging to see this optimism feed through to
an upturn in demand for investment goods, such as plant and
machinery, as this hints that firms are moving back into expansion
mode, albeit only tentatively so far.
"However, while the outlook has improved, further growth is by
no means assured. Survey respondents continue to report widespread
concerns over issues such as tariffs, the auto sector’s ongoing
malaise, a lack of pricing power amid weak demand and uncertainty
about the economic and political situation over the coming year.
While the survey data are moving in the right direction, the
overall picture therefore remained one of only very modest growth
and guarded optimism."
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. August 2019 data were collected
12-23 August 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 (NYSE: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/20191101005387/en/
IHS Markit 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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