- Chris Williamson, chief economist at Markit
The US manufacturing activity unexpectedly slowed in February, with US factories reporting the worst business conditions for over three years. The flash manufacturing PMI dropped to 51.0 in the current month, down from 52.4 in January. Back in December, the reading dropped to the lowest level since October 2012. American manufacturers have been struggling with headwinds blowing from appreciation of the US Dollar, China's economy slowdown, as well as a volatile stock market. In addition to that, lower oil prices have hit hard manufacturers tied to the energy industry, undermining domestic production, lowering demand for steel, drilling equipment and other manufactured products used in the industry. As the manufacturing sector accounts for a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic health of the US.
Last week, the Labor Department's report showed that the US underlying inflation surged to the highest level in more than four years in January, led by increasing rents and medical costs, a sign that price pressures started to build that could allow the Fed to gradually hike interest rates this year. The consumer price index, excluding the volatile food and energy components, increased 0.3% last month. That was the biggest surge since August 2011 and followed a 0.2% rise in December.
© Dukascopy Bank SA