U.S. manufacturing sector records improvement in February, new orders rise sharply

The U.S. manufacturing sector saw one of the strongest improvements seen in the past three years in February, led by a sharp growth in new orders. The seasonally adjusted IHS Markit manufacturing PMI dropped a bit to 55.3 in February to 55.5 in January.  Growth of manufacturing output remained strong in February, despite easing slightly to a three-month low. The sustained upturn in production was widely linked to greater client demand and increased order book volumes.

New business received by manufacturers grew at a more rapid rate in February, with growth reaching a 13-month high. The steep upturn was commonly linked to the acquisition of new clients and successful marketing strategies. New business from abroad also rose further in February, although at a slightly slower rate than January.

Improved inflows in new business and more favorable demand conditions were largely stated as key factors behind improved sentiment among manufacturers in February. However, the level of optimism was lower than the long-run series average.

Inflationary pressures intensified in February. Input prices rose at the most rapid rate since December 2012, reportedly driven by supplier shortages and greater global demand for inputs. Supply chain delays were among the highest seen over the past three years. Where possible, panelists reported that costs were passed onto clients through higher charges. Factory gate price inflation accelerated to the fastest for over four years.

In response to sustained and solid growth in new work, goods producers rose their purchasing activity at a sharp rate in February. In spite of this, preproduction inventories rose at the softest rate for five months, as manufacturing firms reported used stocks to fulfill new orders.

Finally, the pace of factory job creation strengthened to the third-fastest since June 2015. Ongoing capacity pressures were also seen in a further rise in the level of outstanding business.

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