The Markit Flash U.S. Manufacturing PMI declined slightly from 53.9 in August to 52.8 in September. Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the U.S. released on October 1. The lower figure in September was mainly due to an easing in sales, with the index for new orders down from 56.5 to 52.7. This was the slowest pace for new orders since April, with export sales also lower (down from 52.0 to 49.1).
Hiring continues to be sluggish in the U.S., as we have seen in recent jobs data. Employment gains have been positive, but growing very slowly. The Markit data were consistent with this, with the employment index down from 53.2 to 51.4.
The good news is that manufacturing activity overall continues to increase modestly. In contrast to some of the other variables, manufacturing production in the U.S. picked up, with the output index rising from 53.4 to 55.3. With slower sales growth, however, the pace of production will probably decelerate somewhat when the October readings are announced.
Meanwhile, overall manufacturing activity in China and the Eurozone continue to stabilize, rebounding from past weaknesses. The HSBC Flash China Manufacturing PMI, for instance, increased from 50.9 in August to 51.1 in September. This was its highest point since March, and it was the second straight month of expansion following three months of contraction.
The data were mostly positive across-the-board, indicating that the Chinese economy’s pickup has begun to increase activity. The new orders index rose from 50.5 to 52.6, with export sales shifting to positive growth (up from 46.5 to 50.8). Likewise, the pace of the gains has increased for output, up from 50.6 to 51.1. Hiring growth, on the other hand, has now fallen for six consecutive months, despite a slowing in the rate of decline for September (up from 48.9 to 49.3).
Across the globe, the Markit Flash Eurozone PMI edged slightly lower from 51.4 in August to 51.1 in September. The larger headline, though, was that PMI values have now been above 50 – the threshold for expansion – for 3 straight months, which has been a huge psychological boost following 23 months of contraction. Europe has begun to emerge from its deep recession, albeit with still slow growth.
With the exception of employment, all of the key measures of activity indicated growth, with a bit of deceleration in September from August’s indices. New orders (down from 53.0 to 52.0), exports (down from 53.6 to 53.2), and output (down from 53.4 to 52.1) were all growing very modestly, but at a slower pace than the month before. On the hiring front, employment continues to be negative (49.2), but the index was at its highest level since January 2012.
In short, the economies of China, the Eurozone, and the U.S. were all expanding somewhat modestly in September. That suggests that global growth is mostly moving in the right direction, following some softness in the spring and early summer months. Yet, it is also true that economic challenges persist. Hiring was weak in all three surveys, and real GDP still remains lower than desired in each economy. For the U.S., the slower pace of new orders suggests that current headwinds might dampen demand moving into October. As such, it will be important for policymakers to continue to seek pro-growth measures to achieve a more sustainable rate of expansion moving forward.
Chad Moutray is the chief economist, National Association of Manufacturers.
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