IHS Markit: PMI of 63.4 Shows Healthy Manufacturing Sector

Written by David Schollaert

The U.S. manufacturing sector saw the most substantial improvement in operating conditions on record, according to July’s U.S. Manufacturing PMI data from IHS Markit.

“July saw manufacturers and their suppliers once again struggle to meet booming demand, leading to a further record jump in both raw material and finished goods prices,” said Chris Williamson, chief business economist at IHS Markit. “Despite reporting another surge in production, supported by rising payroll numbers, output continued to lag well behind order book growth to one of the greatest extents in the survey’s 14-year history, leading to a near-record build-up of uncompleted orders.”

Despite supplier shortages, output expectations remained upbeat amid hopes of further boosts to client demand over the coming year. The seasonally adjusted IHS Markit PMI posted a 63.4 in July, up from 62.1 in June and slightly higher than the earlier released “flash” estimate of 63.1 (a reading above 50.0 indicates growth). The improvement in the health of the manufacturing sector was the strongest in the 14-year history of the series.

Overall growth was supported by stronger expansions in output and new orders, with the latter increasing at the second-fastest pace since data collection began in May 2007, said Williamson. “The result is perhaps the strongest sellers’ market that we’ve seen since the survey began in 2007, with suppliers hiking prices for inputs into factories at the steepest rate yet recorded and manufacturers able to raise their selling prices to an unprecedented extent, as both suppliers and producers often encounter little price resistance from customers.”

Unparalleled supplier shortages and delays continued to exert upward pressure on input costs and stymie firms’ ability to process incoming new work. Cost burdens rose at a record-breaking rate, as a result, and the accumulation of backlogs accelerated, added Williamson. “Capacity is being constrained by yet another unprecedented lengthening of supply chains, with delivery delays reported far more widely in the past two months than at any time prior in the survey’s history. Manufacturers and their customers are consequently striving to maintain adequate inventory levels, often reporting the building of safety stocks where supply permits, to help keep production lines running and satisfy surging sales.”

David Schollaert

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