By Daniel Hunter
The final Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 54.6 in March, signalling a further improvement in overall US manufacturing business conditions. The PMI was up from February’s 54.3 but down from the earlier flash estimate of 54.9, and consistent with a solid rate of expansion.
The PMI averaged 54.9 in Q1 2013 as a whole and, up from 52.6 in Q4 2012, indicated the strongest quarterly performance in two years.
A further strong rise in manufacturing output was recorded in March, although the rate of growth eased to a three-month low. Moreover, all three market groups saw an increase in production over the month, with manufacturers of intermediate goods (suppliers of components to other producers) reporting the strongest expansion.
The increase in output partly reflected higher new work intakes, as well as recent business expansions. Overall, the volume of total new orders received by manufacturing firms grew strongly in March (the same pace as in February), with an increase in new export orders also reversing a reduction one month previously.
The rate of job creation in the U.S. manufacturing sector quickened in March, and was faster than the average for 2012 as a whole. Panellists that hired additional staff over the month generally cited increased business activity.
Manufacturers bought a larger quantity of inputs in the latest survey period, reflecting higher production requirements.
Stocks of purchases also increased, but the marginal rate of inventory accumulation merely reversed the depletion seen one month previously. Meanwhile, suppliers’ delivery times continued to lengthen in March, and to a greater extent than in February.
Although firms recorded increased input costs in March, largely reflecting higher raw material prices, the rate of inflation continued to slow and was the weakest in six months. Companies passed on greater costs to clients by raising their output charges, but the latest increase in selling prices was the slowest in four months.
“Manufacturers enjoyed another month of strong output and order book growth in March, finishing off the best quarter for two years. The sector will have provided a firm boost to the economy in the first quarter, with output possibly growing by as much as 2% (roughly 8% annualised) compared to the final quarter of last year," Chris Williamson, Chief Economist at Markit said.
“It is encouraging to see the upturn generating more jobs, with the survey suggesting that approximately 15,000 extra employees were taken on in the sector in March.
“The Fed will want to see this pattern of stronger production growth and faster job creation sustained for some time, and will be especially keen to see how the sector performs when facing fiscal headwinds in the coming months. However, policymakers will be reassured by the strong performance of the manufacturing economy so far this year.”
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