A first look at the nation’s manufacturing for this month shows business conditions improved just a little from the previous month, remaining strong, while a separate report showed that although new homes sales fell last month, they posted a double-digit gain compared to a year ago.
The seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index registered 56.6 in May, up fractionally from 56.5 in April, to signal the strongest improvement in business conditions since September 2014. A reading above 50 indicates manufacturing is expanding.
The preliminary May data revealed relatively strong rises in both manufacturing production and incoming new business, which survey respondents attributed to improving economic conditions and a continued recovery in domestic sales.
There were signs that manufacturers intend to boost production schedules in the coming months, according to the report. Backlogs of work were accumulated at the strongest pace since September 2015, and payroll numbers increased to a greater extent than in the previous month. Moreover, business optimism regarding the year ahead outlook was the highest since February 2015.
In anticipation of greater workloads, manufacturers signaled a robust increase in input buying during May. Pre-production inventories also picked up, with the degree of stock accumulation the largest since the start of 2018.
Meanwhile, the latest data showed intense pressure on supply chains, with average lead-times lengthening to the greatest extent since the survey began in May 2007. Manufacturers widely commented on stretched supplier capacity and logistics delays.
“Input costs measured across both manufacturing and services are rising at the fastest rate for nearly five years, with the goods-producing sector seeing the steepest cost increases for seven years in recent months,” said Chris Williamson, chief business economist at IHS Markit.
A final report on manufacturing during May from IHS Markit, as well as a similar survey from the Institute for Supply Management, are due out on June 1. Both reports for April showed manufacturing continued expanding, though they differed in just how much activity increased overall.
April New Home Sales Decline from March
A Commerce Department report showed sales of newly built, single-family homes edged down 1.5% in April to a seasonally adjusted annual rate of 662,000 units, after a downwardly revised March report.
The decline in new home sales, which is estimated to be at a little more than 10% of total new home sales, was less than many analysts were expecting.
The government also revised sales data going back to 2013, resulting in sales in the first three months of the year not being as strong as previously reported. Compared to a year ago, April new home sales increased 11.6%.
“Even with this minor dip, new home sales continue to trend upward and reflect builders’ overall confidence in the market,” said National Association of Home Builders Chairman Randy Noel.
Regionally, new home sales rose 11.1% in the Northeast and 0.3% in the South. Sales remained unchanged in the Midwest and dropped 7.9% in the West after a very strong March reading.
“Stronger job and income growth appear to be driving demand for new homes, and sales are off to a solid start this year,” said analysts at Wells Fargo Securities. “Rising mortgage rates and rising home prices will likely put a relatively low ceiling on sales gains this year.”