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2 Feb 2015
Strong print for US manufacturing PMI, but signs of cooling
FXStreet (London) - The final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index came in at 53.9, signalling a robust improvement in overall business conditions. However, the headline PMI was unchanged since December and the joint lowest for a year, thereby indicating that growth momentum across the manufacturing sector has cooled from the peaks seen in the summer of 2014.
According to the Markit survey, slower new business growth was the main drag on the headline index in January. Survey respondents noted that improving economic conditions had boosted sales at the start of the year, but export demand remained subdued. There were also reports from investment goods producers that weaker spending patterns among clients in the oil and gas sector had contributed to weaker new business growth.
Markit reported that despite a moderation in the pace of new order gains, the latest survey data highlighted an upturn in output growth from December’s 11-month low. Moreover, the increase in manufacturing production during January was the strongest for three months.
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said: “Manufacturing continued to expand in January, but the sector remains in a lower gear compared to that seen last summer. Factory output growth and job creation remain well below last year’s peaks, adding to the suspicion that the pace of economic expansion in the first quarter could even fall below the 2.6 percent rate seen in the final quarter of last year.
“The strong dollar is hurting the competitiveness of exports, and the weak oil price is already resulting in weaker demand for investment goods from the energy sector. However, low oil prices are also helping to cut manufacturing costs, which fell for the first time in two-and-a-half years, and should also help boost consumer spending power, driving economic growth high.
“The fear is that the economy will become increasingly reliant on the consumer to sustain growth, which is another reason besides the economic slowdown to believe that policymakers will be wary of raising household’s borrowing costs via rate hikes any time soon.”
According to the Markit survey, slower new business growth was the main drag on the headline index in January. Survey respondents noted that improving economic conditions had boosted sales at the start of the year, but export demand remained subdued. There were also reports from investment goods producers that weaker spending patterns among clients in the oil and gas sector had contributed to weaker new business growth.
Markit reported that despite a moderation in the pace of new order gains, the latest survey data highlighted an upturn in output growth from December’s 11-month low. Moreover, the increase in manufacturing production during January was the strongest for three months.
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said: “Manufacturing continued to expand in January, but the sector remains in a lower gear compared to that seen last summer. Factory output growth and job creation remain well below last year’s peaks, adding to the suspicion that the pace of economic expansion in the first quarter could even fall below the 2.6 percent rate seen in the final quarter of last year.
“The strong dollar is hurting the competitiveness of exports, and the weak oil price is already resulting in weaker demand for investment goods from the energy sector. However, low oil prices are also helping to cut manufacturing costs, which fell for the first time in two-and-a-half years, and should also help boost consumer spending power, driving economic growth high.
“The fear is that the economy will become increasingly reliant on the consumer to sustain growth, which is another reason besides the economic slowdown to believe that policymakers will be wary of raising household’s borrowing costs via rate hikes any time soon.”