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US manufacturing industry hits 3-month low in October: Markit

H.S. Borji
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The US manufacturing industry fell to a three-month low October, as new business growth weakened to its lowest level since January, while the pace of employment growth remained steady.

Markit Group’s flash estimate of US manufacturing activity was 56.2 in October, down from the previous month’s reading of 57.5. A median estimate of economists called for a slight decline to 57.0. A reading above 50 is a general sign of expansion in manufacturing activity, whereas a reading below that level signifies contraction.

The flash estimate represents analysis on approximately 85 to 90 percent of total survey responses. Markit Group will release its final manufacturing PMI estimate on November 3.

New business growth weakened in October and was the biggest contributor to the overall decline in manufacturing activity. New business orders rose at the slowest pace in nine months, a sign demand was moderating. As a result, manufacturing output growth slowed, as production volumes fell to the lowest level since March.

September and October marked the first back-to-back slowdowns in the rate of output growth since May 2013, Markit data showed.

Despite the decline, manufacturing employment remained elevated in October. Job creation was little changed from September’s two-and-a-half year high, as businesses reported growing business backlogs and gave a positive appraisal of the long-term business outlook.
“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,” said Markit chief economist Chris Williamson in a statement.

Factory activity has been a major source of growth in the world’s largest economy. Industrial production – a broader measure of factory output that includes manufacturing, mining and utilities – increased 1 percent in September, more than twice the consensus estimate, the Board of Governors of the Federal Reserve System reported last week.

September was the sixth time in seven months industrial output increased, a sign goods production continued to buoy the economy after a volatile first quarter. Manufacturing production, which accounts for around 12 percent of the US economy and three-quarters of industrial output, increased 0.5 percent in September, official data showed.

Year-on-year, the manufacturing sector saw output rise 3.7 percent.

The manufacturing PMI averaged 57.2 over the course of the third quarter, Markit reported last month. That was the best quarterly average since the survey began in 2007. The average suggests the manufacturing sector played a leading role in economic growth in the third quarter.

The Commerce Department will produce an initial estimate of third quarter growth next week. The more volatile advance estimate is expected to show the US economy accelerated at an annual rate of more than 3 percent in the third quarter. The US economy grew at an annual rate of 4.6 percent in the April to June period after contracting unexpectedly in the first quarter.

According to the Federal Reserve, America’s GDP is on pace to grow 2 percent to 2.2 percent this year.

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