U.S. manufacturing sector’s health rebounds only marginally, PMI index falls in May to lowest since September 2009

The health of the U.S. manufacturing sector saw only a marginal rebound. The seasonally adjusted IHS Markit manufacturing PMI index dropped to 50.5 in May from April’s 52.6. This is the lowest since September 2009. The latest figure hinted at only a slight recovery in operating conditions. The data for the second quarter so far have shown a distinct deceleration in the manufacturing sector compared to the initial three months of 2019. An important factor weighing on the headline reading was the weakest growth of output since June 2016. May data hinted at only a slight rise in production that was often attributed to clearing backlogs of previously-paced orders.

Meanwhile, manufacturers hinted at the first fall in new orders since August 2009. Though only fractional, survey respondents stated that soft client demand drove the fall. Some companies also noted that customers were postponing orders because of growing uncertainty about the outlook. Similarly, new business from abroad shrank for the first time since July 2018, although at a marginal rate.

On the contrary, manufacturers showed a lower degree of confidence towards output in the years ahead. Expectations for growth fell to their joint-lowest since the series started in July 2012, as companies underlined worries surrounding ongoing trade tensions and a growing trend of customers postponing new orders, especially among large clients.

Meanwhile, cost burdens rose just modestly in May. The rise was the slowest since July 2017, with reports of tariffs driving costs higher being countered by increased competition among suppliers. Subsequently, companies increased their factor gate charges only a bit amidst attempts to remain competitive.

Companies have hinted at a further rise in employment in May. The upturn was attributed to the replacement of voluntary leavers and retirees. However, the growth was the slowest since March 2017 amidst tight labor market conditions.

Purchasing activity was widely unchanged in May as companies showed greater attempts to use current inventories for production and increased attempts to readjust stock levels in light of softer demand conditions.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -38.8531 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex