The Markit Flash U.S. Manufacturing PMI fell to its slowest pace in more than three years in February, a sign that challenges hitting the sector have not yet abated. The composite measure declined from 52.4 in January to 51.0 in February, and in general, manufacturing activity has decelerated over the course of the past year, down from 55.1 in February 2015. On the positive side, new orders (down from 53.6 to 51.7), output (down from 53.2 to 51.3) and employment (down from 52.8 to 51.5) expanded somewhat, just not as far as we might prefer, with the rate of growth slowing in February for each. On the other hand, exports (down from 51.1 to 49.1) returned to negative territory after two months of progress, a sign of just how much the stronger dollar and weaknesses abroad have dampened international demand and overall sentiment.
Meanwhile, European manufacturers have also reported slower growth on global headwinds. The Markit Flash Eurozone Manufacturing PMI decreased from 52.3 to 51.0, its slowest pace in 12 months. As such, manufacturing activity decelerated for the second straight month, down from 53.2 in December, which had been its fastest pace since April 2014. The underlying data were lower across-the-board in February, including new orders (down from 53.0 to 51.6), output (down from 53.4 to 51.9), exports (down from 52.3 to 51.1) and hiring (down from 52.1 to 50.9). Much like the U.S. data, however, the silver lining is that each of these measures continues to experience positive growth. This is encouraging, especially given the fact that European data have generally trended in the right direction of late.
More than anything, this report shows that Europe is not immune to the softening in manufacturing activity seen worldwide. This includes France (down from 50.1 to 49.6) and Germany (down from 52.3 to 50.2), both of which also had Flash data released today. Germany manufacturing growth was essentially stagnant, at its lowest level since November 2014; whereas, the French data were contractionary for the first time in six months.
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