Economy Watch: Manufacturing Not Rebounding from Slack Q1

Markit's latest U.S. manufacturing PMI dropped to its lowest level in more than six years, reflecting the sector's continued sluggish growth in 2016.

U.S. manufacturing experienced a sluggish first quarter this year, and the prospects for a rebound aren’t looking great. That’s according to the preliminary (April) estimate of Markit’s Purchasing Managers’ Index (PMI) for the sector, which was released on Friday.

The PMI dropped to its lowest level in more than six-and-a-half years, even though the manufacturing sector is still growing—albeit not very fast. The index’s movement is concerning, especially to the industrial real estate market. The more goods made in American factories, the higher occupancy rates in warehouses and distribution facilities, especially those in major East and West coast markets, through which the goods move for export.

In April, the index came in at 50.8, down from 51.5 in March. The survey data, according to Markit, is consistent with manufacturing output falling an an annualized rate of more than 2 percent at the start of the second quarter.

According to Markit, some survey respondents suggested that uncertainty about the direction of the U.S. economy and the political climate (and indeed, it’s been a strange election so far) had weighed on the sector in April. Also, export sales continued to act as a drag on overall new business volumes. The latest survey pointed to the sharpest drop in new work from abroad since November 2014.