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US manufacturing growth continues in March

01 April, 2014

The US manufacturing sector grew “solidly” during March, with output levels and new business volumes both rising sharply, according to the latest Manufacturing PMI (Purchasing Managers’ Index) survey. Although the increase in new work was slower than in the previous month, it was still the second-fastest since May 2010, and the rate of production growth was little-changed from the near three-year high recorded in February.

The manufacturers surveyed by Markit Economics attributed the good performance to a combination of improving demand and a catch-up following the weather-related slowdown earlier in the year.

The March PMI was 55.5 – down from 57.1 in the previous month, but its second-highest level since January 2013. The main factor behind the slight drop was extended supplier delivery times and, to a lesser extent, a moderation in new order growth since February’s high. Output and employment growth changed little over the previous month.

A strong increase in production levels was due mainly to stronger domestic demand. New work levels rose sharply, but new orders from abroad grew only marginally.

For the ninth month running, US manufacturers created jobs, with firms generally attributing the increase in employment to improving confidence about the economic outlook. There are signs that the weather-related squeeze on supply chains started to ease in March.

The March PMI data reveals that large manufacturers (those with more than 500 employees) were by far the best performing of the three company size categories monitored by the survey. They were also the only company size group to record faster expansions of output and new business than the previous month.

The PMI US manufacturing output index (blue curve) and the Federal manufacturing output index (orange curve) are tracking each other closely
Source: Markit

“The fall in the composite Manufacturing PMI masks the ongoing resilience of output, new orders and employment growth – all of which continued to rise at historically strong rates in March,” comments Markit’s chief economist, Chris Williamson. “That’s because the PMI also includes a measure of supplier delivery times, which dragged the PMI down but only because deliveries were quicker as a result of improved weather.

“The survey indicates that factory output growth has picked up again after the weather-related disruptions seen at the start of the year,” he adds, “presenting policymakers with an encouraging picture of a healthy goods-producing sector that is generating jobs at the rate of 15–20,000 per month.

“With warehouse inventories falling – in many cases due to sales outstripping production – factories look set to continue to expand capacity in coming months, taking on more staff and boosting business investment.”




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