Business Activity Passes 5-Year High: Report

U.S. business activity reached a more than five-year high in September, but the resulting activity appears to be straining supply chains and causing higher prices.

Reuters reported that S&P Global said on Wednesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 58.4 this month, its highest level since July 2021 and higher than the 56.0 reading registered in August.

A reading above 50 indicates expansion in the private sector. The rise in the PMI reflected strong gains in both the services and manufacturing sectors, according to the Reuters report. The PMI was consistent with the economy growing at around a 5% annualized rate, S&P Global said. It also noted a sharp rise in work backlogs and supply chain delays, “pointing to a lack of operating capacity which fed through to higher prices.”

The Atlanta Federal Reserve’s gross domestic product tracking estimate is running at a 5.1% rate. The economy grew at a 1.5% pace in the April-June quarter.

“Business is clearly booming now in both manufacturing and services,” Chris Williamson, chief business economist at S&P Global Market Intelligence, told Reuters. “However, this growth is being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded.”

Chicago Fed President Austan Goolsbee said on Monday supply shocks were proving more persistent, adding there was evidence that strong demand was adding to the problem, Reuters reported. That view was supported by the findings of the S&P Global survey.

Though companies across manufacturing and services sectors boosted hiring to tackle the order backlog, S&P Global also noted increasing reports of problems finding suitable staff.

“While this accumulation of uncompleted orders bodes well for the further expansion of output and capacity in the coming months, it also indicates that companies are developing more pricing power, and hence is a worry for the inflation outlook,” Williamson told Reuters.

Link: https://www.corpmagazine.com/industry/business/business-activity-passes-5-year-high-report/