U.S. December manufacturing PMI rises to highest since March 2015

The data for December showed that U.S. manufacturing operating conditions improved noticeably. The seasonally adjusted IHS Markit final Manufacturing PMI index rose to 55.1 in December from November’s print of 53.9. The latest index reading is the highest since March 2015 and hinted at a strong rebound in the health of the sector. December data also rounded off the strongest quarterly performance since the beginning of 2015. Output at manufactures grew at a steep rate in December, with growth reaching an 11-month high. Panelists have linked the greater production to more favorable demand conditions and increased new order volumes.

New business received by manufacturers continued to increase in December, with the pace of growth accelerating to a 10-month high. Anecdotal evidence linked rises to greater demand from new and existing clients. However, export sales rose at a marginal rate. Consistent with greater production requirements, companies added to their payrolls and at the most rapid rate since September 2014. Increased capacity pressures were also shown in backlog accumulation. The upturn in outstanding business accelerated and was the most rapid since October 2015.

In the meantime, input price pressures deepened with the pace of cost inflation accelerating for the second straight month. Moreover, the marked pace of rise was the second-fastest since December 2013. Panelists have attributed the increases to higher raw material prices, which was partially driven by supplier delays. In the meantime, factory gate charges rose strongly, despite the pace of inflation weakening since November.

Greater production requirements also affected purchasing activity which rose at the most rapid rate since February. Therefore, pre-production stocks also grew at the end of the year. Business sentiment continued to be strong in December, with manufacturers reporting the second-highest level of positivity since January 2016. Positive output expectations were attributed to forecasts of greater client demand.

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