U.S. manufacturing sector records slightly slower growth pace in June, PMI index falls to 55.4

The U.S. manufacturing sector saw a slightly weaker rate of growth in June. The seasonally adjusted IHS Markit Manufacturing PMI came in at 55.4 in June, a fall from May’s 56.4. The latest PMI reading rose from the ‘flash’ figure of 54.6 and ended the strongest quarterly performance since the third quarter of 2014. Output growth continued to be strong in June, in spite of the pace of growth easing to a seven-month low.

The upturn in new orders was the weakest since November 2017. Even if the expansion eased, it was strong nonetheless. Panellists attributed the growth to strong client demand and favourable market conditions. But, new business from abroad contracted for the first time since July 2017, in the midst of reports of weaker foreign client demand after recent tariff announcements.

The pace of input cost inflation was the slowest for four months; however, it remained sharp. The rise in cost burdens was due to greater global demand for inputs and the effects of recent tariffs. Supplier shortages were a key factor behind longer delivery times. Lead times for inputs lengthened to the greatest extent in the series history.

Factory gate prices also rose sharply, with the pace of inflation quickening to the second-fastest since June 2011. Panellists stated that higher input costs were partially passed onto clients. Reflective mainly of difficulties in sourcing raw materials, purchasing activity and stocks of purchases rose at weaker rates in June.

Capacity pressures continued, in spite of employment growth accelerated since May, as backlogs rose strongly. The pace of job creation was the most rapid since February and outstanding business rose at the second-strongest pace since September 2015. Business sentiment was solid in June. Optimism was attributed to expected sustained upturns in output and new orders. However, sentiment dropped to the lowest level for five months.

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