Markit Manufacturing Data Shows Slower New Orders and Output

By July 24, 2012Economy

Manufacturing activity slowed somewhat in July, according to the latest Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI). The “flash” PMI – which is an advance measure of the final PMI data using 85 to 90 percent of the total responses – fell from 52.5 in June to 51.8. While this reading suggests continued expansion in the sector, it also reflects a weakening in overall manufacturing conditions. This is the lowest value in the index since December 2010.

The pace of new orders and output eased in the month, with both at their lowest levels of the past year. The new orders index, for instance, dropped from 53.7 to 51.9. Inventories were also rising, suggesting that some of their stock has gone unsold.

On the positive side, net hiring remained stable, with the employment measure virtually unchanged. Meanwhile, manufacturers continue to benefit from lower energy and raw material costs. This is somewhat a mixed blessing, though, as selling prices were also lower. 

The Markit flash PMI report is another indicator showing a slowing U.S. and global economy. Unlike the PMI from the Institute for Supply Management (ISM), net new orders were not contracting, something that helped send the ISM index below 50 for the first time since mid-2009.

Nonetheless, it is clear that manufacturers are anxious in the current climate. Challenges in Europe and slowing growth around the world are easing exports, and businesses are worried about the tax and regulatory climate in the U.S.

To get the economy moving again, policymakers must do what they can to address the fiscal cliff and to slow the pace of harmful regulations on the manufacturing sector. Through pro-growth policies manufacturers can continue to drive economic growth again.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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