Economy
IHS Markit: Manufacturing Sector Healthy Despite Slight Dip in PMI
Written by David Schollaert
September 1, 2021
The U.S. manufacturing sector saw significant improvement in August, supported by steep upturns in production and new orders, according to the latest U.S. Manufacturing PMI data from IHS Markit.
“U.S. goods producers continued to register marked upturns in output and new orders in August, as demand flourished once again. That said, constraints on production due to material shortages exerted further pressure on capacity as backlogs of work rose at a near-record rate,” said Siân Jones, senior economist at IHS Markit. “Not only were firms facing difficulties trying to clear outstanding work, but they also faced further hikes in supplier costs. The pace of cost inflation exceeded the previous series record amid a pervasive scarcity of inputs. Favorable demand conditions allowed finished goods prices to also rise at an unprecedented rate, as firms sought to protect their margins.”
Although output expectations strengthened, employment growth eased as firms struggled to retain staff and find suitable candidates for current vacancies. The seasonally adjusted IHS Markit PMI posted a reading of 61.1 in August, down from 63.4 in July, but broadly in line with the earlier released “flash” estimate of 61.2 (a reading above 50.0 indicates growth). The latest improvement in operating conditions was the softest for four months, but nonetheless among the strongest seen in the 14-year series history.
Overall growth was dictated by a sharp expansion in production during August, albeit the slowest for five months. Where an increase was reported, it was generally linked to a further upturn in new orders and firm demand conditions. The softer expansion of output was due to capacity constraints including material shortages, said Jones. “Delivery times lengthened at the second-sharpest rate in over 14 years of data collection, with purchasing activity still rising markedly. It was not only producers who highlighted stockpiling, however, as reports of customers shoring up their holdings of finished items resulted in a substantial drop in post-production inventories.”
Material shortages hampered output growth in August, as supplier delivery times increased to one of the greatest extents on record. Longer lead times were attributed to greater global demand for inputs and capacity issues at suppliers. Cost burdens rose substantially in August as a result, added Jones. “The rate of input price inflation was the fastest seen in more than 14 years of data collection amid supplier price hikes. To partially pass on greater costs to their clients, goods producers raised their selling prices at the steepest pace on record.”
David Schollaert
Read more from David SchollaertLatest in Economy
Metalformers expect steady conditions in coming months
Metalformers expect economic activity to stabilize over the next three months, according to the recently released July Business Conditions Report from the Precision Metalforming Association (PMA).
Architecture Billings Index rises from 4-year low in June
The Architecture Billings Index (ABI) ticked up in June following May’s four-year low, according to the American Institute of Architects (AIA) and Deltek. While the index improved this month, it continues to indicate weak business conditions among architecture firms.
Beige Book: Uncertainty to continue fueling slower economic growth
Growth in the US economy continues to be constrained. The Federal Reserve’s Beige Book report for July shows more areas reporting flat or declining economic activity than in its previous report at the end of May.
AISI, AISC, University of Massachusetts get ~$6.4M EPA grant
The American Iron and Steel Institute (AISI), American Institute of Steel Construction (AISC), and the University of Massachusetts at Amherst have received a grant to enhance emissions reporting for steel construction projects.
Manufacturing activity in New York state continues to soften
New York state saw a continued decline in manufacturing activity in July, according to the latest Empire State Manufacturing Survey from the Federal Reserve Bank of New York.