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Manufacturing Growth Hits 8-Month Low

The U.S. Manufacturing Purchasing Managers' Index (PMI) signaled another month of slowing growth, according to a Markit report (link opens as PDF) released today.

After finalized May numbers clocked in at 52.3, June's 51.9 is the slowest rate of growth since October 2012. A reading above 50 signals overall economic expansion, while below 50 denotes contraction. Analysts overestimated manufacturing's moves, predicting June's reading to mirror May's 52.3.

"Manufacturing clearly down-shifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year," said Markit Chief Economist Chris Williamson in a statement today. Williamson went on to describe the performance of individual index components:

Output growth remained well down on the robust pace seen at the start of the year and persistent weak order book growth suggests the sector is at risk of stalling. Domestic demand is far from lively, but it is a deteriorating export scene that is causing the real problems. Export orders are being lost at the fastest rate since the height of the financial crisis in mid-2009. Firms are responding to the increasingly worrying order book trend by pulling back on recruitment. The employment picture from the survey is the weakest for almost three-and-a-half years, consistent with roughly 30,000 jobs being lost per month in the manufacturing sector.

Looking ahead, Williamson hinted that the Federal Reserve's employment projections may be overly optimistic: "We will need to see a swift turnaround in this employment trend if the Fed's projection of a drop in the unemployment rate to 7% by the end of the year is to be achieved."

With June's numbers in, the PMI Index for Q2 overall clocks in at 52.1, 5.1% lower than Q1's 54.9 and the lowest reading since 2012's third quarter.


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