US factory activity weakest since financial crisis in May, IHS Markit says

Conditions in US manufacturing were at their weakest last month since the Great Financial Crisis, including among large corporates, which over the course of just a handful of months had seen surging order books replaced by shrinking ones.

IHS Markit's factory sector Purchasing Managers' Index slipped from a reading of 52.6 for April to 50.5 in May, reaching its lowest print since September 2009, linked to a slowdown in production.

"Weak demand conditions and ongoing trade tensions led firms to express the joint-lowest degree of confidence regarding future output growth since data on the outlook were first collected in mid-2012," IHS Markit said.

According to the survey compiler, companies' level of output, which was at its weakest since June 2016, "was often linked to clearing backlogs of previously-placed".

Indeed, in May new orders registered their first outright decline since August 2009.

"Similarly, new business from abroad contracted for the first time since July 2018, albeit at a marginal rate. Consequently, manufacturers exhibited a lower degree of confidence towards output over the coming year," IHS Markit said.

Commenting on the results of the survey, Chris Williamson, Chief Business Economist at IHS Markit said: "May saw US manufacturers endure the toughest month in nearly ten years, with the headline PMI down to its lowest since the height of the global financial crisis. New orders are falling at a rate not seen since 2009, causing increasing numbers of firms to cut production and employment.

"At current levels, the survey is consistent with the official measure of manufacturing output falling at an increased rate in the second quarter, meaning production is set to act as a further drag on GDP, with factory payroll numbers likewise in decline."