The United States Markit Manufacturing PMI Final was reported for December @ 55.1 from 53.9 in the previous period, beating expectations slightly. The latest index reading was the highest since March 2015. All-in-all a good sign for the improvement of the manufacturing sector.
The data from the survey indicates that U.S. manufacturing operating conditions improved into year end. This months rise in expectations were supported by output strength and more client demand expressed in an increase in new orders.
With production growth continues to show robustness employment rose at it’s fastest pace since September 2014. The additional rise in employment can be explained by the rise in backlog orders, which increased at it’s fastest pace since October 2015. The report noted that firms capacity pressures remain high.
More to the point, with the supply chain of the firms surveyed experiencing capacity pressures and more global demand for inputs, pushed costs higher in December. With the rate of cost inflation remaining sharp overall, however, charge inflation (wage-push inflation) softened.
Additionally, as we saw last week from the conference board print, Business confidence remained robust. IHS Markit’s report cited this sustained confidence from the businesses was driven for the most part by favorable demand conditions.
Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“US manufacturers ended 2017 on a high. Output growth accelerated to its fastest since the start of the year on the back of a marked upswing in demand as the year came to a close.
“Prospects for the upturn also look good. With business optimism about the year ahead running at its highest for two years in the closing months of 2017, companies are clearly expecting to be busier in 2018.
“The upbeat mood is underscored by an increased appetite to hire new staff, with the survey indicating that factory payroll numbers are rising at a rate not seen for over three years.
“Indicators of backlogs of work and input buying likewise suggest production will continue to grow at a solid pace as we move into 2018. However, the strengthening of demand for raw materials has led to supply chain delays, which have in turn been increasingly linked to higher prices as a sellers’ market develops. Input price inflation accelerated to one of the highest rates seen over the past five years in December, as suppliers hiked prices for a wide range of inputs.
“The combination of strengthening growth, a solid labor market, and rising prices will add to expectations that the Fed will remain on track for another rate hike in the near future, with March looking a likely possibility.”
Manufacturing Purchasing Managers Index (PMI)
What Is It: A timely series of reports on manufacturing activity in different countries and regions.
Most Current News Release on the Internet: www.markiteconomics.com/Survey/Page.mvc/PressReleases
Home Web Address: www.ntc-research.com/
Release Time: Varies with different countries. A schedule of upcoming releases can be viewed here: www.markiteconomics.com/Survey/Page.mvc/DiaryofReleaseDates
Sources: Markit Economics (formerly NTC Economics), J.P. Morgan, HSBC Holdings plc, Institute for Supply Management (ISM), International Federation of Purchasing and Supply Management (IFPSM).
Revisions: Markit Economics does not revise the monthly survey data after the first publication. However, seasonal adjustment factors are revised from time to time.”
Bernard Baumohl. The Secrets of Economic Indicators