Markit Report: Factory Activity Growth At 8-Month Low

May 2017 marks an 8 month low for the US Manufacturing PMI according to the IHS Markit report, falling slightly to 52.7 from 52.8 in April. Slowed growth of output, and employment confirms a downward trend that had been emerging from its 22 month peak in January at 55. While revised up from previously reported 52.5, this measurement of overall business growth and job creation in the manufacturing sector came in under the expected mark of 53.

While production volume was up, prices for manufactured goods also increased at a slower than expected rate which likely will hurt many producers’ bottom lines.  Still, manufacturing output has been growing steadily in the US, having increased continually for a year as of May. One likely cause for the slowdown in growth is that retailers and resellers are cautious of consumer demand as reports emerged that consumer confidence fell more than expected in both April and May. This uneasiness could lead to a slowdown in reorders and decrease in held inventory.

Manufacturers also noted that overseas demand may be dropping, noting that exported goods sales were lower than expected. Additionally, many have found that they do not have as much work on their plate as they clear out and deliver their overdue work. This could point to an increased competition for new business.

Even with the downward trends in production, employment across the manufacturing sector expanded as payrolls increased slightly. According to the survey, “resilient business confidence and optimism about the general economic outlook had helped to underpin staff recruitment in May.”

Bottom line: Consumer Confidence retreats, inventories drop, and US Manufacturing production takes a bigger hit than expected.

Via a 5/31/2017 report by IHS Markit on US Manufacturing PMI

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