Markit: Manufacturing Sample Is Showing Weakness

Markit's U.S. manufacturing sample is finally reporting weakness, weakness long registered across the breadth of other manufacturing data. The manufacturing PMI, at 52.6 for the November flash, is still above 50 to indicate monthly growth but the rate of growth is the slowest for this sample in more than two years, since October 2013. Growth in new orders is also the slowest in just over two years with respondents citing special weakness in exports which, hit by the strong dollar and weak global demand, dipped back into the contraction column in the month. Markit's sample still, however, reports a "robust" rate of production which is a positive indication for November industrial production.

Other readings include the first drop in a year for backlog orders and a fourth straight dip for finished goods inventories. Price data show contraction for inputs, one tied to lower transportation and commodity prices, and little change for finished goods prices. A sign of strength comes from another gain for employment, again in contrast to other data.

Everything is relative and the slowing in this report could lower expectations for other factory data. Watch tomorrow's calendar for data on goods exports and the latest factory news from the Richmond Fed.

Recent History Of This Indicator:
Unlike most other measures, the manufacturing PMI has not been signaling contraction for the sector. Far from it, with the index trending near the mid 50s and a 54.5 reading expected for the November flash. Regional reports on November activity have been constructive including the closely watched Philly Fed which moved back over breakeven. But the manufacturing PMI has been well above breakeven, in fact never approaching its 50 breakeven mark while the factory sector in fact has been in contraction all year. But the text of this report did describe October production as "robust" which, if not quite robust, was confirmed by a solid rise in the manufacturing component of the industrial production report.