Manufacturing Growth is Still Uncertain for 2016

Uncertainty heightens on whether manufacturing is still in recession but Markit reports an improvement in business conditions across the U.S. manufacturing sector.

Data collected from the month of January shows faster rates in output and new orders than those seen at the end of 2015. However, job gains continue to slow down.

Key Points:

1. According to the news release, Markit Manufactuing purchasing manager’s index (PMI) picks up from the 38-month low to 52.4 and slightly missed economists’ forecasts for 52.7.

Markit chief economist Chris Williamson adds,

“Despite picking up slightly, the January PMI reading is one of the worst seen over the past two years, highlighting the ongoing plight of the manufacturing sector. One bright light appeared, in that order book growth picked up, led by an upturn in domestic demand. However, hiring remained in the doldrums, suggesting that firms remain cautious in relation to the business outlook and reluctant to expand capacity.”

 

2. Output and new orders expand at faster rates which indicates there is a great deal of growth in export sales.

Although, manufacturers have reported a slight drop in pre-production inventories and broadly unchanged stocks of finished goods at their plants, orders are still rising from the drop shown from the end of 2015.

3. Job creation eases as payroll numbers expand again at the start of the year. The release indicates that firms held back staff hiring in January as the business outlook cautioned them. Similar to Markit’s release, the Institute of Supply Management’s (ISM) PMI shrank at 48.2 rather than the expected 48.5. ISM’s employment gauge also fell from 48 to 45.9.

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