American Factory Growth Slowed In June

What is the 'Markit Manufacturing PMI'?

In the United States, the Markit Manufacturing Purchasing Managers’ Index (PMI) measures the performance of the manufacturing sector and is derived from a survey of 600 industrial companies. The Manufacturing Purchasing Managers Index is based on five individual indexes with the following weights: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stock of Items Purchased (10 percent), with the Delivery Times Index inverted so that it moves in a comparable direction. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.

What is the Latest Data?

In June 2018, the IHS Markit US Manufacturing PMI fell to 54.6 from 56.4 in May, well below market expectations of 56.5. The reading pointed to the slowest expansion in factory activity in 7 months, following the strong growth rates seen in recent months, preliminary estimates showed. New work rose the least since September last year, partly reflecting a slight drop in export sales. 

Longer suppliers’ delivery times persisted in June, with the latest deterioration in vendor performance the greatest recorded since the survey began more than 11 years ago.

Manufacturers noted that a shortage of transport capacity following tighter trucking regulations had led to supply bottlenecks. Some firms also noted that efforts to build up safety stocks had been held back by shortages of stock among vendors.

Meanwhile, strong demand for raw materials and stretched supply chain capacity continued to push up average input prices in June. Survey respondents widely commented on rising steel costs and increased prices for related items.

The overall rate of input price inflation eased further from its recent peak, but remained among the strongest seen since 2012. At the same time, factory gate charges increased at a robust pace that was little-changed from April’s near seven-year high. We shall see how things continue to pan out for manufacturing activities.

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