The U.S. manufacturing sector registered a slight improvement in operating conditions in April 2023 with a seasonally adjusted purchasing managers’ index or PMI at 50.2 in April, up from 49.2 in March, and broadly in line with the earlier released flash estimate of 50.4. The latest index reading was the first to post above the 50.0 neutral mark for six months and was the highest since October 2022.
Supporting the renewed overall upturn was a return of new order growth following six successive months of contraction. The rise in new sales was only fractional, however, as manufacturers continued to note hesitancy among customers to place orders amid higher prices and global economic uncertainty. The improvement in demand was also limited to the domestic market, as new export orders contracted for an eleventh consecutive month and at a solid pace, according to S&P Global’s latest U.S. manufacturing PMI survey.
Meanwhile, input costs and output charges increased at steeper rates during April. Higher supplier prices reportedly drove inflation as firms passed through greater operating expenses to customers. The rate of cost inflation quickened to the sharpest in three months, while the pace of increase in selling prices also accelerated above the series average.
Firms purposefully depleted stocks of purchases and finished goods, as inventories were used to supplement production, with contractions seen in both. The filling of long-held vacancies and anticipations of greater new order inflows to come led to a stronger increase in employment in April. Manufacturers expanded workforce numbers at the fastest pace in seven months in an effort to broaden capacity.
In turn, goods producers were better placed to process incomplete work. Backlogs of work fell further and at a solid pace, albeit the slowest in the current seven-month sequence of decline. Manufacturers were upbeat in their year-ahead output expectations in April. The degree of optimism rose to the strongest for three months and was broadly in line with the series long-run average. Planned investment, greater supply chain reliability, and hopes of an uptick in client demand reportedly drove confidence.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “Although only modest, the rise in new orders hints at a tentative revival of demand, notably from consumers but there are also signs that fewer customers are deliberately winding down their inventory levels.
“The brightening demand picture was accompanied by a lifting of business confidence about the outlook and increased hiring. The downside was a reigniting of inflationary pressures, with a stronger order book encouraging more firms to pass through higher costs to customers.”