U.S. Manufacturing PMI Hits Three-Month Low in October Amid Weakest Pace of New Business Growth Since January
- Output and new order growth both eased markedly in October
- Slowest rise in new export sales since July
- Robust rate of job creation maintained
At 56.2 in October, down from 57.5 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ indicated a slower improvement in overall business conditions across the manufacturing sector. Although still comfortably above the neutral 50.0 value, the index was the lowest since July and notably weaker than the average seen during the third quarter as a whole (57.1).
Softer new business growth was the main negative influence on the headline PMI in October, as the latest rise in new orders was much weaker than in September and the slowest for nine months. A number of survey respondents commented on more cautious spending patterns among clients, especially in relation to export sales. October data pointed to only a moderate expansion of new orders from abroad, with the pace of growth easing sharply to a three-month low.
In line with softer new business gains, manufacturing output growth also slowed in October. The latest increase in production volumes was the weakest since March. Moreover, the rate of output growth has now moderated for two months in a row, which represents the first back-to-back slowdown since May 2013.
October data pointed to resilient manufacturing payrolls trends, despite a continued moderation in both output and new business growth. The rate of job creation was little-changed from September’s two-and-a-half year high and much sharper than the average seen since the survey began in May 2007. Survey respondents generally pointed to increasing backlogs of work at their plants and positive sentiment towards the long-run business outlook.
Manufacturers indicated an accumulation of post-production stocks for the fourth month running in October, although the rate of growth was only marginal. Meanwhile, pre-production inventory levels rose at the sharpest pace in the seven-and-a-half year survey history, which firms linked to a combination of increased purchasing activity and slower-than-expected output growth in October.
Input cost inflation eased markedly to its weakest for six months during October. Anecdotal evidence pointed to support from lower commodity prices during the latest survey period (especially copper). Reduced cost pressures in turn resulted in the slowest increase in factory gate charges for four months.