U.S. manufacturing PMI index falls in August but hints at strong growth

The U.S. manufacturing sector’s health rebounded strongly in August. The seasonally adjusted IHS Markit final manufacturing PMI index fell slightly to 54.7 from 55.3 in July. Although this hints at the softest rebound in operating conditions since last November, the PMI showed a solid overall manufacturing performance.

Furthermore, the latest figure continued to be well above the long-run series average. Output growth throughout the goods-producing sector continued to be solid, in spite of the pace of growth weakening to an 11-month low. Panellists that recorded higher output generally attributed this to greater new order volumes.

Similarly, new business rose at a slightly slower, albeit still strong, rate in August. Anecdotal evidence stated that greater new orders from home and abroad had driven growth. Furthermore, new business from abroad returned to expansionary territory. Nevertheless, some panellists noted that client demand was comparatively lacklustre when compared to the beginning of the year, leading to a slightly softer overall upturn.

Consequently, rates of employment and backlog growth continued to be strong. This was in spite of the rates of growth weakening to four-month lows. Anecdotal evidence commonly stated that job creation stemmed from increased production requirements and greater efforts to recruit skilled labor. On the price front, manufacturers hinted at a marked rise in input costs. Although the pace of inflation weakened to a six-month low, it continued to be marked and was attributed to new trucking regulations, higher raw material prices, and supply shortages.

Average charges rose solidly, with respondents reportedly partly passing higher costs on to clients in order to protect profit margins. Although dipping to a five-month low, the pace of inflation continued to be well above the long-run series trend.

In the meantime, supplier delivery times lengthened further in August. Although lead times increased to the softest extent since February, the pace of deterioration remained historically marked. Panellists continued to report broad based stockpiling of inputs, with purchasing activity rising strongly. Finally, expectations towards output over the coming 12 months rebounded. The extent of confidence reached a three-month high.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 107.588. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex