Manufacturing Growth Hits 4-Month High

Manufacturing Growth Hits 4-Month High

The Markit Flash U.S. Manufacturing Purchasing Managers' Index increased 1.3 points to 53.2 from June to July, according to a Markit report (link opens a PDF) released today. After two months of no growth, this latest report puts manufacturing at a four-month high and back on an upward trend. Analysts had expected an improvement, but their 52.8 prediction proved too conservative for July's results.

The "flash" estimate is typically based on approximately 85% to 90% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data. An above-50 reading denotes growth, while a sub-50 number equates to economic contraction.

Digging deeper into July's gain, the index's output, new orders, work backlogs, and quantity of purchases components all expanded at a faster rate. New export orders and employment went from contraction in June to growth in July. Inventories also shrank, with stocks of purchases and finished goods dropping from expanding rates the month before.

Looking ahead, Markit Chief Economist Chris Williamson remained cautiously optimistic:

The Fed will therefore be encouraged by signs that the sector is showing signs of reviving, but will no doubt remain cautious with regard to the longer term outlook for the economy and the job market. It is likely that policymakers will generally need to see growth strengthen further before sounding more confident about the ability of the economy to withstand any tapering of stimulus.

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