U.S. flash manufacturing PMI index rises marginally in July

The seasonally adjusted IHS Markit Flash U.S. Manufacturing PMI index came in little changed since June. The index rose marginally to 55.5 in July from June’s 55.4 and above the average since this index started in May 2007. A relatively solid rebound in manufacturing business conditions reflected strong new order growth, along with a strong upturn in both production volumes and employment numbers.

The overall rebound in manufacturing performance was supported by strong domestic demand growth, which aided in countering another slight decline in export sales. Although just marginal, the latest fall in new work from abroad was the greatest seen since May 2016. Inventory building continued in July, with some manufacturers seeking to stimulate their stocks of raw materials in response to stretched supply chains. The latest lengthening of vendor lead-times was the greatest seen in over 11 years of data collection. Survey respondents widely commented on low stocks among suppliers and capacity constraints throughout the freight industry.

On the inflation front, latest data showed another sharp rise in average cost burdens, which manufacturers overwhelmingly linked to increased raw material prices. There were broad-based reports that tariffs on steel and aluminium had pushed up input costs in July. Strong client demand and attempts to protect margins led to the strongest pace of factory gate price inflation since May 2011.

In spite of worries regarding increased input costs and tight labor market conditions, manufacturing firms continued to be positive about the year-ahead business outlook. The degree of positive confidence picked up since June and continued to be comfortably above that seen on average in 2017, which partially reflected optimism about the outlook for domestic economic conditions.

At 20:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -143.12. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex