A rebound in overall growth momentum largely reflected stronger rises in output and new business levels in July. Meanwhile, softer job creation was the main factor weighing on the headline PMI during the latest survey period.
Manufacturing production volumes increased at a robust and accelerated pace in July. Reports from survey respondents cited improving domestic economic conditions and a general upturn in client demand. That said, some manufacturers noted that reduced capital spending within the energy sector continued to act as a drag on sales.
Measured overall, July’s survey pointed to a strong rise in incoming new business, with the rate of expansion picking up to its fastest for three months. A number of survey respondents noted that subdued export demand, as well as the strong dollar, had encouraged them to focus sales efforts on faster growing domestic markets. July data nonetheless indicated a marginal rebound in total new work from abroad, which ended a three-month period of falling export sales across the manufacturing sector.
Despite an upturn in output and new business growth in July, the latest survey signalled a degree of caution among manufacturers in terms of input buying and job hiring. The latest increase in purchasing activity was the slowest for a year-and-a-half, which some survey respondents linked to excess inventories at their plants. Meanwhile, manufacturing payroll numbers expanded at the least marked pace since April.
July data indicated that cost inflation remained subdued across the manufacturing sector. Although input prices increased for the third month running, the pace of inflation moderated since June and was well below the survey average. Manufacturers pointed to subdued raw material costs and lower prices from overseas suppliers (especially those based in Asia). Factory gate price inflation also remained subdued in July, with the latest rise in U.S. manufacturers’ output charges the weakest recorded for three months.