Markit’s Flash PMI Hits More Than 2-Year Low in November

Monday brought a mixed view of economic data. First seen was the Chicago Fed National Activity Index improving, but still barely negative in October. Now the Markit Flash U.S. Manufacturing PMI for manufacturing fell in November to its lowest reading in 25 months and reversing the rise seen in October.

November data indicated a setback for U.S. manufacturing sector growth. This is not what some market watchers may be hoping for considering that there was a modest rebound recorded during the month of October. November’s Flash PMI reading of 52.6 was lower than the 54.1 reading in October. The seasonally adjusted PMI data pointed to the slowest improvement in overall business conditions since October 2013.

An overall decline in the headline index in November reflected weaker contributions from all five PMI components. It was shown up front that there were slower rates of output, new orders and employment growth. Also shown was a renewed drop in new export sales during November.

While many reports are backward looking, investors and economists might want to consider that the Flash PMI data for manufacturing companies was collected between November 12th and 20th. Markit refers to the overall data as still being robust, but production growth has moderated since the previous month and was slightly weaker than its average for 2015.

Markit’s PMI data (both the flash and final reports) are derived from information collected by Markit from a different panel of companies to those that participate in the ISM Report on Business. Just keep in mind that Markit specifically says that no information from the ISM survey is used in the production of Markit’s PMI.

Additional data, edited down, was seen as follows:

• Reports from survey respondents generally cited a cyclical slowdown in demand patterns and ongoing weakness in export sales.
• The index measuring new orders from abroad dipped back inside negative territory in November.
• Lower levels of new work from abroad were linked to a combination of the strong dollar and weaker global economic conditions.
• Manufacturers signaled greater caution in terms of their purchasing activity and inventories during November.
• The latest rise in input buying was the weakest since January 2014, while stocks of finished goods dropped for the fourth month running.
• Pre-production inventories were broadly unchanged, which contrasted with the pattern of modest growth seen throughout most of the past year-and-a-half.
• Manufacturing payroll numbers were reported to have increased again in November, continuing the trend seen for much of the past six years — but the latest expansion of employment levels was only modest and weaker than seen on average over the recovery period.
• There was also a drop in backlogs of work for the first time in 12 months.
• November data pointed to a further lengthening of suppliers’ lead-times, but the latest deterioration was slightly less marked than that recorded in October.
• Prices, measured by the average cost burdens, fell for the third month running and were overwhelmingly linked to lower transportation and commodity prices.