American manufacturing is still in distress.
On Tuesday morning, we got two key data points that showed that the strong dollar and weak oil prices are still squashing growth in the sector.
Markit’s manufacturing purchasing manager’s index (PMI) came in at 51.3. It recorded the weakest rise in manufacturing output since October 2013.
Economists had expected it at 51.2 compared to 51 prior according to Bloomberg.
The report noted that clients spent prudently because they lacked confidence in the business outlook, and so volumes of new work grew at a sluggish pace.
Demand from overseas also slowed, as new orders from abroad fell at the sharpest pace since last April.
Markit chief economist Chris Williamson said in the report (emphasis ours),
The February data add to signs of distress in the US manufacturing economy … With other headwinds including the downturn in the oil sector, heightened uncertainty due to financial market volatility, global growth worries and growing concerns about the presidential election, it’s no surprise that the manufacturing sector is facing its toughest period since the global financial crisis.
The ISM manufacturing index came in at 49.5. Economists had estimated it at 48.5 (48.2 prior).
And so this was also a beat on the forecast, but the headline index remained in contraction, as the manufacturing sector shrank for a fifth straight month.
This report indicated a second straight rise in new orders and production.
Nine out of 18 industries reported growth, including food and beverage & tobacco makers.
“To be clear, this is not a robust report, and we have no real hopes of a sustained strong rebound this year,” wrote Pantheon Macroeconomics’ Ian Shepherdson. “But the hits from the strong dollar, the slowdown in China and the collapse in capex in the oil sector are all diminishing.”