Rates of reduction were strong overall, as firms sought to trim stocks further and engage in cost-cutting efforts amid muted domestic and international demand conditions. Weak demand for inputs led to another decrease in supplier delivery times, as vendor performance improved solidly and to a greater extent than in June, S&P Global said in a press release.
US’ manufacturing index rose to 49.0 in July 2023, indicating the slowest decline in operating conditions over a 3-month period.
Despite a modest increase in new orders, input buying and inventories fell due to muted demand and cost-cutting efforts.
Workforce numbers increased marginally at the beginning of Q3, with a higher uptake in manufacturing roles.
Manufacturing firms saw production broadly unchanged on the month, following a contraction in June, supported by producers relying on backlogs of work and a shallower drop in new orders. Where companies registered a rise in output, this was linked to sustained demand and the acquisition of new customers. That said, constraints on client spending, including higher interest rates, reportedly dampened demand.
Total new orders rose further in July. The rate of expansion slowed for the second month running, however, to the softest since April. Goods producers continued to see demand conditions deteriorate, thereby extending the current sequence of decline to three months. Manufacturers saw export demand conditions worsen in July.
Challenges in foreseeing future demand trends weighed on expectations for the outlook over the coming year, driving confidence to the lowest in 2023 to date.
Manufacturers, however, expressed greater positive sentiment towards the outlook, as expectations reached the strongest since April 2022. Hopes of lower cost pressures, a greater ability to hire new workers, the Inflation Reduction Act and increased marketing investment spurred confidence.
US firms expanded their workforce numbers further at the start of the third quarter. The rate of job creation was only marginal, however, and the weakest since January. Manufacturers and service providers alike recorded growth in employment, with goods producers registering a stronger uptick in staffing numbers. Some manufacturing companies noted that the solid rise in payrolls was due to greater ease of hiring, with some also mentioning an improvement in employee retention and improved confidence in the outlook.
Backlogs of work were broadly unchanged during July, amid a divergence in pressure on capacity at the sector level. Manufacturers relied further on backlogs of work to support output, with work-in-hand dropping sharply again.
Following a resurgence in cost inflation during June, the rate of increase in total input prices softened in July to the slowest since October 2020, dropping in line with the long-run series average. Companies stated that higher input costs were due to greater raw material prices, including oil, and increased wage bills. Although manufacturers saw a renewed rise in costs, the rate of inflation was only slight.
The rate of output charge inflation meanwhile picked up in July. Goods producers noted little change in selling prices, with the rate of inflation the joint-slowest in the current 38-month sequence of increase.
“July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation. The stickiness of price pressures meanwhile remains a major concern. As the survey index of selling prices has acted as a reliable leading indicator of consumer price inflation, anticipating the easing to 3 per cent in June, it sends a worrying signal that further falls in the rate of inflation below 3 per cent may prove elusive in the near term,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence.
Fibre2Fashion News Desk (NB)
