The US manufacturing sector growth gathered momentum in February, with output and new orders both rising at sharper rates than seen at the start of the year. Input costs decreased marginally for the second month running, but firms continued to raise their output prices. Meanwhile, delays in the delivery of items contributed to an accumulation of backlogs of work and a record increase in finished goods stocks.
The US Manufacturing Purchasing Managers’ Index (PMI) rose to 55.1 in February from 53.9 in the previous month. The reading signalled the most marked improvement in business conditions in the sector since October 2014.
Manufacturing production growth quickened to the sharpest in four months during February, with firms linking higher output to increases in new business.
Higher new orders were one factor leading to an accumulation of backlogs of work in February, while supplier delivery delays had also contributed to rising outstanding business. Delivery times lengthened to the greatest extent since February 2014, with firms reporting adverse weather conditions in some parts of the country. Meanwhile, stocks of finished goods increased at the sharpest pace since the series began.
Manufacturers raised employment, as has been the case in each month since July 2013. That said, the rate of job creation eased to the slowest in seven months.
A solid increase in purchasing activity was recorded amid reports of greater production requirements. That said, the rate of expansion eased to the slowest since January 2014.
Chris Williamson, chief economist at Markit said, "Manufacturing braved the cold weather in February, reporting an upturn in the pace of growth. A flurry of activity towards the month end helped raise production to a greater extent than signalled by the earlier flash reading. The upbeat survey points to minimal impact from the adverse weather that affected many parts of the country during the month."
"While growth of manufacturing output remained below the peaks seen last year, the survey is broadly consistent with production rising at an annualized rate approaching 4%."
"Employment continued to rise, albeit with the rate of job creation slipping as many companies cited increased uncertainty about the outlook, especially with the strong dollar hitting competitiveness."
"Lower oil prices meanwhile once again helped reduce firms' costs slightly for a second month running, but average selling prices rose at the fastest rate since November, suggesting core inflationary pressures are in fact rising."
"The combination of strong production growth, ongoing job creation and rising factory prices will keep alive the possibility that the Fed could be encouraged to start hiking interest rates as early as June."
