US Factory Activity Growth at 1-Year High: Markit

The final IHS Markit Manufacturing PMI for the US increased to 53.4 in October 2016 from 51.5 in September and slightly better than the earlier flash reading of 53.2. It was the highest figure since October last year, as both production and new orders expanded at a faster pace and employment rose for the fortieth month in a row. Meanwhile, cost inflation went up to highest level for two years.
Markit | Joana Ferreira | 11/1/2016 1:55:33 PM
Driving the PMI higher in the latest survey period was a strengthening in production, which was in turn supported by a marked upturn in new orders. In both cases, rates of growth indicated by respective sub-indices were at their strongest in a year, reportedly the result of firmer market demand and the development of new products.

Both of these factors encouraged inventory building during the month, with both finished goods stock and input inventories rising since September. Growth in raw material and semi-manufactured inventories was the best since October 2015 and was also underpinned by a marked rise in purchasing activity. Latest data showed that manufacturers responded to positive demand developments by buying inputs at a rate not seen since June 2015.

October’s survey implied that domestic demand was key in driving the expansion of new order books. Whilst there was an increase in new exports, reflective of improved client relationships and general market expansion, growth was modest and lagged those seen during the summer.

Rising production and new order requirements placed some pressure on capacity during October, with backlogs of work increasing to the greatest degree in three months. This development encouraged further hiring of staff, with the latest data showing a rise in employment for the fortieth month in a row. However, growth was modest and slightly down on September’s pace.

Amid reports of rising commodity prices, average input costs increased for the seventh month in a row. The rate of inflation was also the greatest recorded by the survey for two years, and encouraged companies to pass on these higher costs to clients in the form of increased output charges. The net result was a solid pace of charge inflation that was the strongest seen since November 2011.

 US Factory Activity Growth at 1-Year High: Markit