US’ flash PMI dips to 46.3 in Nov 2022; sharpest contraction since Aug

The headline flash US purchasing manager’s index (PMI) composite output registered 46.3 in November 2022, down from 48.2 at the start of the fourth quarter, reflecting a solid contraction in business activity across the US private sector. The rate of contraction signaled was the sharpest since August and among the fastest since 2009.

Demand conditions worsened as the fourth quarter progressed, with new orders across the private sector falling in November at the fastest pace since the initial pandemic wave in May 2020, according to market intelligence firm S&P Global. With the exception of the early stages of the pandemic, the decrease in total new sales was the sharpest since 2009.

The headline flash US purchasing manager’s index (PMI) composite output registered 46.3 in November 2022, down from 48.2 at the start of the fourth quarter, reflecting a solid contraction in business activity across the US private sector. The rate of contraction signaled was the sharpest since August and among the fastest since the year 2009.

Manufacturers recorded steeper declines in new business, with many firms stating that the impact of inflation and interest rates had led to greater hesitancy and postponements by customers in placing orders. On a more positive note, inflationary pressures eased further in November. Private sector input cost inflation softened for the sixth month running, increasing at the slowest rate since December 2020.

Reflecting the slower growth of input costs, firms raised their selling prices at the slowest rate for just over two years. The pace of charge inflation was noticeably softer than seen earlier in the year. Some firms stated that concessions and discounts were made to entice customers to place orders amid the weak demand environment. Meanwhile, lower new order inflows led to a strong reduction in levels of outstanding business at US firms.

Improvements in supply chain stability and hopes of greater client demand following new product launches were key factors spurring greater optimism. Growth expectations nevertheless remained well below levels seen this time last year. At 47.6, down from 50.4 in October, the S&P Global Flash US Manufacturing PMI signaled a renewed decline in operating conditions at manufacturers in November. The deterioration in the health of the sector was solid and the first since June 2020.

Contributing to the decrease in the headline figure was a renewed fall in output and a sharper decline in new orders. Demand conditions were stymied by inflation and economic uncertainty, according to panellists, with new sales falling at the fastest rate since May 2020. Alongside challenging domestic demand conditions, new export orders contracted at a sharper pace.

Nevertheless, there were positive developments in November, as firms signaled the first improvement in supplier performance since October 2019. Faster lead times were, however, often linked to reduced demand for inputs. Moreover, purchasing activity fell at the sharpest pace since May 2020 as firms reportedly worked through excess inventories.

In line with shorter delivery times for inputs, firms recorded a slower rise in cost burdens. Average input prices increased at the softest rate for two years amid reports of lower costs for key inputs.

Although historically elevated, factory output price inflation also eased in November. Firms sought to drive sales and entice customers, with selling prices rising at the slowest pace since January 2021. Difficulties in finding skilled labor remained apparent in November, however, which—combined with concerns over weakening demand—caused the rate of employment growth to slow to only a marginal pace. Backlogs of work fell sharply in part due to firms receiving inputs in a more timely manner, but new orders also declined at an increased rate.

“While the reduced supply chain stress is partly a symptom of lower demand, the alleviation of supply delays removes a key driver of inflationary pressures and has helped moderate the overall rate of input cost inflation to a near two-year low. November even saw increasing numbers of suppliers, factories, and service providers offering discounts to help boost flagging sales. In this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Fibre2Fashion News Desk (NB)

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