US manufacturing industry slows: Markit
The United States’ manufacturing industry slowed to its lowest level in a year, according to Markit Group. The October PMI reading of 51.1 suggests the manufacturing industry expanded at a modest pace, after more robust growth the previous month.
Manufacturing growth fell to a 12-month low, as output contracted for the first time since September 2009. Outputs fell after new orders grew at their slowest rate in six months, signalling weaker demand in the domestic economy. Export orders increased marginally over the previous month, counterbalancing a similarly sized fall in September.
Manufacturers also reported higher prices for steel and other raw materials, signalling inflationary pressures are on the rise. Manufacturers passed on the greater cost burden to clients by raising prices.
Employment in the manufacturing industry expanded for the fourth consecutive month, albeit marginally. New product developments were the biggest reason for the increased uptake. Slow employment growth in manufacturing reflects the modest pace of job creation elsewhere in the economy. Earlier in the week the Labor Department said employers added a mere 148,000 payrolls in September, which suggests the economy was losing momentum toward the end of the third quarter.
The slowdown in manufacturing activity “suggests that the disruption and uncertainty caused by the [government shutdown] hit companies hard,” said Chris Williamson of Markit. “The Fed will be equally unsure of the health of the economy,” Williamson added, speaking to the Federal Reserve’s future policy actions.
Manufacturing output fell for the first time since the height of the sub-prime mortgage crisis in September 2009. Because manufacturing dominates a large segment of gross domestic product, fourth quarter GDP growth likely suffered a setback, leaving the Federal Reserve little choice but to prolong its current pace of stimulus. The Fed’s balance sheet has swelled to more than $3.6 trillion.
The latest round of quantitative easing, which was set in motion in September 2012, has injected $800 billion into the financial markets.
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