U.S. manufacturing PMI index falls in July

Manufacturing companies in the U.S. hinted at a solid rebound in operating conditions in the month of July, despite the headline PMI index falling to a five-month low. The seasonally adjusted IHS Markit Manufacturing PMI index dropped to 55.3 in July from June’s 55.4. In all, the latest rebound in the sector’s health was the joint weakest this year to date; however, it remained solid in the context of historical data.

Production in the U.S. manufacturing sector continued to rise in the month, extending the current sequence of growth that started in June 2016. Where a rise in output was seen, panelists attributed this to increase in client demand and increased new order volumes. Although the pace of growth was solid overall, it was the most decelerating since November 2017. However, growth in new order continued to outstrip that of output. The latest rise in new business matched that recorded in June and was solid overall. Anecdotal evidence implied the rise was because of the acquisition of new clients and favorable demand conditions. However, growth was mainly driven by the domestic market, with foreign demand declining slightly for the second straight month.

Consistent with a sustained rise in new orders, backlogs continued to grow strongly in the month. Meanwhile, panelists reported difficulties in filling current vacancies on the employment front. The pace of job creation weakened despite increased pressure on production capacities.

Pressure on supplier chains also deepened, as underlined by delivery times lengthening to the greatest degree since the series started. Increased demand for inputs was worsened by companies recording stockpiling raw materials. Furthermore, the pace of input price inflation rose to the third most rapid since March 2012 and was sharp overall.

Companies also commented on attempts to pass costs onto clients through higher prices, with the pace of charge inflation accelerating to the most rapid since June 2011. Nevertheless, some stated that competition between companies was a drag on overall pricing power.

Expectations about the output outlook over the next year rebounded in July. Sentiment was largely linked to new product developments and more favorable demand conditions.

At 19:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 6.82807. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex