“Manufacturers reported their weakest growth since the start of 2014 in May, with the survey results adding to fears that the strong dollar is weighing on the US economy and hitting corporate earnings. Although falling only modestly, export sales have now dipped for two straight months, something not seen for two years and a far cry from the solid export performance seen this time last year.
Overall order books are consequently growing at the slowest rate seen since the start of last year. “The weaker order book trend doesn’t appear to have affected hiring, at least not yet, with job creation picking up in May. However, unless production growth revives there is a worry that payroll growth will slow as companies seek to boost productivity.
“Higher oil prices are meanwhile pushing up firms’ input costs for the first time so far this year, but producers seem to have been able to pass the increase on to customers. However there are few signs of any significant upturn in inflation. “Despite signs of price pressures picking up, the survey is likely to encourage policymakers to err on the side of caution, especially in relation to any further damaging impact of the stronger dollar on growth and earnings if policy were to be tightened. Any decision on hiking interest rates is therefore likely to be put off until later in the year.”
