Manufacturers indicated a strong start to the second quarter of 2014, with the latest survey highlighting expanding levels of production, new work and employment. At 55.4 in April, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) was down fractionally from 55.5 in March but still well above the neutral 50.0 value. Sharper rates of output and new business growth boosted the Manufacturing PMI during April, while the main negative influence on the headline index was a rise in the suppliers’ delivery times component.
April data pointed to a steep and accelerated expansion of manufacturing output levels. The latest increase in production was the fastest since March 2011, with survey respondents mainly citing improving underlying economic conditions and stronger domestic demand. Robust output growth and greater confidence about the business outlook contributed to a solid upturn in manufacturing employment, which extended the current period of job creation to ten months.
Manufacturers signalled a robust and accelerated increase in new business volumes in April, with the rate of growth the second-fastest since May 2010 (only exceeded by the weather-related rebound seen in February). The latest increase in new orders from abroad was the strongest since August 2013, although export trends remained subdued in comparison to overall new business gains across the manufacturing sector.
Stronger new order growth contributed to a build-up of unfinished work for the third month running in April. The rate of backlog accumulation was one of the fastest recorded in the seven-year survey history. Some survey respondents indicated pressures on operating capacity at their plants, while others cited ongoing disruptions to production from raw material shipment delays.
Input buying among manufacturing firms increased at the sharpest pace for just over two years in April, but greater output requirements contributed to a decline in stocks of purchases for the first time since the start of 2014. Meanwhile, manufacturers noted that finished goods inventories were reduced at the slowest pace since last December.
Suppliers’ delivery times lengthened again in April, reflecting strong demand for inputs and low stocks at vendors. However, the rate of deterioration eased sharply since March, with the latest downturn in supplier performance also much less marked than that seen during the weather-related disruptions earlier in the year.
On the inflation front, manufacturers experienced a further solid increase in average cost burdens in April. That said, the rate of input price inflation was the slowest since May 2013, which in turn contributed to the weakest increase in factory gate charges for nine months.
