Manufacturing output slows to seven month low

03 November, 2018, 05:58 | Author: Eric Barnett
  • China's Manufacturing Sector Expands Marginally

USA manufacturing firms signalled a strong start to the final quarter of 2018, with operating conditions improving at a faster pace in October.

Detrimental exchange rate movements, rising raw material prices and the SST were all cited as sources of cost pressures in October.

In addition, the import sub-index, considered a gauge of domestic demand, was also at its lowest level for at least a year at 47.6 - down from 48.5 in September.

October's manufacturing PMI came in at 51.1, down from 53.6 in September and far below the market consensus for an index reading of 53.0. The latest figure signalled a further pick up in growth momentum and a strong improvement in the health of the manufacturing sector.

Markit reported that foreign demand decreased for the second time in the past three months, with some companies reporting that Brexit uncertainties had negatively impacted inflows of new work from within the EU.

Conversely, new export orders grew only fractionally and at the weakest pace in the current three-month sequence of growth. The rate of inflation was marked and broadly in line with its long-run average.

New orders increased solidly during October, which panellists attributed to successful advertising efforts, strengthening underlying demand and competitive price setting.

Business optimism weakest in almost six years.

Even with a mild sequential decline, manufacturing output in October remained strong, according to the monthly Manufacturing Report on Business, which was released by the Institute for Supply Management (ISM) today.

While the central bank surprised markets by keeping interest rates on hold last month after several increases, it shifted its bias from "neutral" to "calibrated tightening" in a nod to pricing pressures.

Consequently, manufacturers tried to partly pass on higher cost burdens to their clients through increased output charges.

The Bank of England has raised interest rates twice, taking bank rate to 0.75%, since November 2017 citing above-target inflation and the prospect of an inflationary pickup in United Kingdom wage growth over the coming year. Inventories of finished goods and purchases both dropped in October.

"New contracts increased at only a modest pace, and firms were the least optimistic regarding the 12-month outlook for almost six years".

In an interview, Fiore said that five of manufacturing's six biggest sectors contributed to the expanding PMI number, but the lone one that did not expand was fabricated metal products, which he said is in the middle of the issues related to steel and aluminum tariffs, adding that new orders were also a drag.



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