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U.S. Manufacturing PMI hits three-month low in October amid weakest pace of new business growth since January

23 October 2014

At 56.2 in October, down from 57.5 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers' Index" (PMI")1 indicated a slower improvement in overall business conditions across the manufacturing sector. Although still comfortably above the neutral 50.0 value, the index was the lowest since July and notably weaker than the average seen during the third quarter as a whole (57.1).

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:

"The flash PMI provides the first available glimpse into how manufacturing is faring at the national level at the start of the fourth quarter, and presents a mixed picture. The data will no doubt add to the view that policymakers should be in no rush to raise interest rates, with output and order book growth slowing and price pressures easing.

"On the other hand, sustained strong job creation will raise worries that slack continues to be eroded, which could drive up inflation in the medium term.

"Although output growth slowed to the weakest since March, the pace of expansion remains robust. Even expanding at this slower rate, the goods producing sector should help drive another solid upturn of the economy in the final quarter of the year.

"A concern is that growth of new orders weakened sharply, which may translate into a further slowdown in coming months. The source of the slowdown appears to be weaker economic growth in key markets such as the Eurozone, China and other emerging markets, which has hit export performance. Many companies reported that domestic demand remains reassuringly strong.

"It's also especially encouraging to see manufacturers' propensity to take on staff unaffected by the slower growth of new orders, which suggest firms are generally upbeat about future business prospects. Although job creation slowed slightly, recent months have seen the strongest spell of payroll growth since the global financial crisis.

"The survey also points to a further easing of price pressures in October, with both input costs and selling prices rising at weaker rates, largely due to lower energy costs."


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Chris Williamson | Chief Business Economist, IHS Markit
Tel: +44 20 7260 2329



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