The U.S. manufacturing and services purchasing managers’ index (PMI) hit a record high in early April, boosted by multiple factors such as new vaccines, fiscal stimulus and more economic reopening, while “unprecedented supply chain disruptions” will hamper production and raise inflation.
According to financial data provider IHS Markit on Friday, April 23, Markit U.S. manufacturing PMI rose to 60.6 in April, slightly below market expectations of 61, higher than the previous value of 59.1 in March, and a record high since the beginning of data collection in May 2007.
Markit U.S. Services Business Activity Index rose to 63.1 in April, well above expectations of 61.5 and 60.4 in March, the highest on record since the data began in October 2009.
This caused the Markit U.S. composite PMI’s preliminary April reading to rise to 62.2, higher than the previous value of 59.7 in March, refreshing the highest level since the data began in October 2009. Meanwhile, the IHS Markit composite price index rose to a record high in March this year.
In terms of market concerns and cost burdens associated with inflation trends, the report noted that unprecedented supply chain disruptions pushed up input costs again in April, as service provider growth moderated and overall inflation eased slightly, but the rate of increase was still the second fastest on record; companies sought to pass on higher costs to customers, and output prices for goods and services rose at an accelerated pace to a new series high.
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Average cost burdens in the services sector continued to rise significantly in April, with inflation driven by increases in the cost of fuel, wages, transportation and personal protective equipment, although the rate of growth was slightly lower than in March and still one of the fastest on record. Inflation indicators charged to customers accelerated in light of increased customer demand and the ability of companies to pass on a greater percentage of input price increases to customers.
Input costs in the manufacturing sector rose at the highest rate since July 2008, primarily due to severe supply shortages and significantly higher transportation costs. The inflation rate indicator for manufacturing charges to customers declined slightly, but the increase was still the second fastest on record.
Chris Williamson, chief business economist at IHS Markit, commented that business concerns about the outlook include a deterioration in the supply situation, “particularly on the price side:”
“The U.S. economy started the second quarter with strong and broad-based growth, with the service sector growing at the fastest pace in the nearly 12-year history of the survey and manufacturers reporting one of the strongest growth rates in seven years. Factories continue to be constrained by unprecedented supply chain delays, sending prices up sharply further. Improvements on the supply side are needed to match demand and it appears difficult to boost capacity in the near term, with backlogs of orders increasing at the highest rate in nearly seven years.”
Following the overall positive data release, the U.S. 10-year Treasury yield returned above 1.57%, setting a new daily high of 1.5718%, and U.S. stocks had softened to a daily low of 1.5296% before the bell. U.S. stocks expanded, the Dow stopped falling and turned up, gold prices once forced down to $ 1770 to refresh the daily low.
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