US manufacturing PMI down to 51.9

US manufacturing has fallen short of analyst expectations, with Markit’s purchasing manager’s index (PMI) falling to 51.9 in June from 52.3 in May - the slowest growth since October 2012. The consensus was for a slight rise to 52.3.

PMI data has been released throughout the day, with disappointing growth in China followed by more encouraging figures in the UK and the Eurozone.

Manufacturing output increased at a modest pace, with firms citing larger volumes of new work domestically, although new export orders fell for the second consecutive month and at the sharpest rate since August 2009.

Employment in the sector, meanwhile, was flat, ending a 40 month series of increases, with a number of firms saying that higher new order requirements were balanced with an attempt to control costs.

Chief economist at Markit Chris Williamson commented on the findings:

Manufacturing clearly downshifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year.

Output growth remained well down on the robust pace seen at the start of the year and persistent weak order book growth suggests the sector is at risk of stalling. Domestic demand is far from lively, but it is a deteriorating export scene that is causing the real problems. Export orders are being lost at the fastest rate since the height of the financial crisis in mid-2009.

Firms are responding to the increasingly worrying order book trend by pulling back on recruitment. The employment picture from the survey is the weakest for almost three-and-a-half years, consistent with roughly 30,000 jobs being lost per month in the manufacturing sector. We will need to see a swift turnaround in this employment trend if the Fed’s projection of a drop in the unemployment rate to 7.0 per cent by the end of the year is to be achieved.