US Manufacturing PMI's final print for June at 53.6 (slightly above its preliminary 53.4 print) is its lowest since October 2013. The survey has fallen almost non-stop since the end of QE3. Under the covers, data was mixed, softer output growth was offset by a slight pick-up in the pace of new business gains and job creation, but Manufacturers indicated a slowdown in production growth for the third month running during June. As Markit's echief economist notes, “Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”
Worst since Oct 2013...
As Markit explains,
June data indicated a slower improvement in overall business conditions across the U.S. manufacturing sector, with softer output growth offsetting a slight pick-up in the pace of new business gains and job creation. The latest survey indicated that subdued export demand remained a key factor weighing down overall new order growth, as highlighted by a fall in new work from abroad for the third month running. Meanwhile, input cost inflation picked up in June, but output charge inflation moderated since the previous month.
The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.6 in June, down from 54.0 in May and the lowest reading since October 2013.
Manufacturers indicated a slowdown in production growth for the third month running during June. Reports from survey respondents suggested that subdued export sales and weaker investment spending patterns in the energy sector had weighed on output growth.
Things changed after the end of QE3...
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:
“Purchasing managers are reporting the slowest rate of manufacturing expansion for over a year and a half, suggesting that the economy is slowing again.
“The slowdown is largely linked to a third consecutive monthly fall in exports, in turn attributed by many companies to the strong dollar undermining international competitiveness.
“Investment spending also appears to be waning, with recent months seeing the slowest growth of new orders for business equipment and machinery for two years. The investment slowdown suggests companies are becoming more risk averse and cautious in their spending. The current impressive rate of factory job creation could soon likewise wane unless the outlook improves.
“The good news is that the export and investment drags are being offset by an ongoing surge in consumer spending, which is in turn most likely linked to falling prices in recent months. An upturn in growth of new orders for consumer goods helped drive an increase in overall manufacturing orders books during the month, providing a ray of hope that output growth will stabilise at its current modest pace.
“Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”