April data indicated that U.S. manufacturers started the second quarter of 2016 with a renewed slowdown in production and new business growth. At the same time, employment levels were close to stagnation and input buying dropped at the fastest pace for two-anda-half years, amid reports of slower than expected demand during the latest survey period.
Adjusted for seasonal influences, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 50.8 in April, down from 51.5 in March and only slightly above the 50.0 no-change threshold. The latest reading was weaker than the average seen in Q1 2016 (51.7) and signalled the slowest improvement in overall business conditions for just over six-and-a-half years.
Output volumes were close to stagnation in April, with the latest survey pointing to the weakest rise since the current period of expansion began in October 2009. Anecdotal evidence suggested that subdued client demand, uncertainty about the economic outlook and lower energy sector capital spending had all acted as a drag on manufacturing production in April. Manufacturers recorded another modest increase in overall new work at the start of the second quarter, but the rate of expansion was the weakest since December 2015.
Reduced export demand had a negative influence on manufacturing order books in April, with new work from abroad decreasing at the fastest pace for nearly one-and-a-half years. A lack of pressure on operating capacity persisted across the manufacturing sector during April, as highlighted by a decline in backlogs of work for the third month running. Moreover, the latest fall in unfinished business was the sharpest since September 2009. This contributed to a near-stalling of payroll numbers in April, with the rate of job creation the weakest for just under three years.
Softer new business growth resulted in lower input buying and cautious inventory policies among manufacturing firms in April. Stocks of purchases decreased for the fifth consecutive month and at the strongest pace since the start of 2014. Postproduction inventories also dropped again in April, although the rate of decline was only marginal.