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Thursday, March 28, 2024

US Manufacturing’s Hurricane-Rebound Is Over: New Orders Sink, Costs Soar

Courtesy of ZeroHedge. View original post here.

The brief rebound in US manufacturing after the hurricanes appears to have ended as Markit’s PMI dropped from 54.6 to 53.9 as new orders slowed amid soaring inflation. For once ISM Manufacturing also agreed with PMI – dropping to its lowest since July – with employment and export orders sinking.

While new orders slowed, the most notable item in the PMI data was that inflation is surging…

Average prices charged by manufacturers rose further in November, with the pace of inflation accelerating to the fastest in almost four years.

Anecdotal evidence suggested the increase was due to greater cost burdens which were largely passed on to clients.

Input price inflation also quickened since October and was steep overall. Survey respondents commonly stated that components costs rose due to logistical delays.

ISM data shows a drop in employment and export orders…

ISM respondents seem enthused still:

  • “Continuing to see more orders for the next six to 12 months.” (Chemical Products)
  • “Strong sales through third and now fourth quarters. Backlog increasing, and capacity at suppliers tightening.” (Machinery)
  • “Business has leveled out but remains strong heading into the end of the year.” (Computer & Electronic Products)
  • “We are just coming off a record sales year. We expect to continue in 2018 robust activity.” (Miscellaneous Manufacturing)
  • “We are seeing steady, consistent demand for end of year. We usually see a slowdown, which we haven’t seen yet.” (Fabricated Metal Products)
  • “Overall industry demand remains strong. Continue to have a healthy backlog of orders. Local economy is also strong, with a fairly tight labor market.” (Transportation Equipment)
  • “Business is strong. Employment is tight. Supplier deliveries have lengthened. A few suppliers are still blaming Hurricane Harvey for the lead times.” (Food, Beverage & Tobacco Products)
  • “Strong season demand for products and continued requirements for uptime.” (Nonmetallic Mineral Products)
  • “Currently, we have not experienced the typical seasonal slowdown toward the end of Q4. Could be that there is a lot of optimism in the American economy.” (Plastics & Rubber Products)

Within the ISM data, we note that the percentage of respondents saying New Orders are ‘better’ dropped to 31, the lowest since November 2016.

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“US manufacturers reported further solid growth in November. The rate of expansion settled slightly after October’s rebound from the hurricanes, but still leaves the sector on course for its best quarter since the opening months of 2015.

“What’s especially encouraging is that growth is being led by producers of business equipment and machinery, indicating investment spending is on the rise.

“Jobs growth in the sector has also picked up in recent months compared with the subdued hiring earlier in the year, suggesting that an expansionary mood is beginning to prevail in the goods producing sector. Business optimism is now at its highest since the start of 2016, underscoring how firms believe the upturn has further to run as we move into 2018.

“Prices continued to rise at an increased rate, linked to higher costs, though in many cases the price hikes were linked to ongoing supply chain disruptions since the hurricanes, suggesting inflationary pressures should start to cool soon, at least in terms of manufacturing costs.”

Transitory?

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