In early April, manufacturing activity in the US was on the rise, but producers were increasingly struggling to obtain raw materials and other resources as the economic recovery boosted domestic demand.
News company IHS Markit said its US manufacturing PMI rose to 60.6 in the first half of this month. It was the highest since the start of the streak in May 2007, after a final reading of 59.1 in March.
Economists had forecast the index would rise to 60.5 in early April. A reading above 50 indicates growth in manufacturing, which accounts for 11.9% of the US economy.
More than half of American adults have received at least one dose of the vaccine, according to the US Centers for Disease Control and Prevention (CDC). A third of the US adult population is fully vaccinated, as are 26% of the general population.
This, together with the $ 1.9 trillion White House proposed COVID-19 bailout package, has spurred broader economic participation, freeing up pent-up demand.
“The US economy has a solid start to the second quarter and is operating at full throttle as loosening virus restrictions, impressive vaccine rollouts, better outlook and stimulus have all boosted demand,” said Chris Williamson, chief business economist at IHS Markit. …
But high demand is pushing supply constraints. The pandemic, now in its second year, has disrupted factories and their suppliers, creating shortages that drive up the prices of raw materials and other resources.
Measurement of prices paid by manufacturers, according to research by IHS Markit, jumped to the highest level since July 2008. Higher raw material prices were attributed to an acute shortage of suppliers and a marked increase in transport costs.
The continuing rise in production costs is one of many factors that are expected to push inflation above the Federal Reserve’s inflation target of 2% this year. Fed Chairman Jerome Powell expressed confidence that supply chains will adapt and become more efficient, as well as prevent high prices from persisting for a long period.
Raw material shortages are most evident in the automotive industry, where a global shortage of semiconductors has led to production cuts in car assembly plants. According to IHS Market, supply shortages were leading to work in progress “not seen in more than seven years.”
IHS’s new orders increased and factories increased their hiring as a result.
The performance improvement also affected the service sector, which was disproportionately affected by the pandemic. The preliminary IHS Markit PMI in the services sector jumped to 63.1, the highest level since the start of the series in October 2009, from a final reading of 60.4.
Growth in the services sector, which accounts for more than two-thirds of US economic activity, was driven by stronger customer demand and the reopening of many businesses amid easing restrictions.
The growth in manufacturing and services has boosted overall business activity. The composite PMI, which tracks the manufacturing and services sectors, rose to 62.2. It was also the highest since the start of the series in October 2009, and stood at 59.7 in March.
Information and analytical department of TeleTrade
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