Steel Products

Flash PMI at Five Month High

Written by Sandy Williams

The Markit Flash U.S. Manufacturing PMI hit a five month high in August.  The PMI registered 53.9 up from 53.7 in July indicating moderate growth in the manufacturing sector.

New orders increased in August attributed to better demand.  Export orders continued to rise this month but softened from July levels.  Production output rose slightly in August but at a slower pace than previously this year.   Inventory levels dropped at the strongest pace since 2009. 

Employment in the manufacturing sector rose due to increased workloads from higher production rates. 

Input price inflation eased but input costs rose strongly on higher steel and packing prices.  Selling prices rose as manufacturers passed higher input costs on to customers.   Delivery times lengthened at the highest increase rate since April 2012. 

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said: 

“The U.S. manufacturing sector saw only modest growth of production in August, suggesting that the economy is continuing to recover in the third quarter but that the pace of expansion remains disappointingly sluggish. 

Hopefully the faster growth of new orders seen during August will translate into increasingly strong production gains in coming months, and also boost hiring. Job creation was the strongest for four months in August, but the sector is still barely contributing to non-farm payroll growth. 

Policymakers will be encouraged by the sustained  recovery and signs of strengthening demand, which  add further weight to the possibility of the Fed  starting to taper its asset purchases as soon as  September. However, the Fed will also be wary of  how fragile growth both at home and abroad is  looking, and will therefore be keen to ensure policy  is not tightened too much too fast.” 

The Purchasing Managers’ Index™ (PMI™) is a monthly composite index based on five indexes:  New Orders, Output, Employment, Suppliers’ Delivery Times and Stocks of Items Purchased.  An index reading above 50 indicates in an expansion in that index area.  The Index is based on a survey of 600 manufacturing companies in the U.S.  The Flash PMI is an advance indication of final PMI data based on 85%-90% of the total PMI surveys received.

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