US Manufacturing Activity Grows Strongest in 4 Years, But Cost Pressures Rise
US manufacturing activity expanded by the strongest pace in four years in May, driven by companies' efforts to anticipate a surge in costs related to the Iran conflict. The S&P Global Flash Manufacturing PMI rose 0.8 points to 55.3, indicating expansion, while the input price index jumped more than 11 points to its highest level since June 2022.
This increase is partly temporary, as the conflict has disrupted supply chains and pushed up energy and basic goods costs sharply. However, overall business activity, including the services sector, remained flat in May, with order growth slowing to its weakest level in two years.
The composite indicator showed the fastest decline in employment in nearly two years, while service providers reduced staff at the second-fastest rate since the start of the pandemic. Input and output prices rose to their highest levels since 2022, with supplier delivery times for manufacturers lengthening the most significantly since mid-2022.
This underscores broadening inflationary pressures, particularly due to the effective closure of the Strait of Hormuz to shipments of energy and essential manufacturing materials. The services sector showed the weakest expectations since April of last year, reflecting lingering concerns about the economic outlook.
Variables to monitor: global energy prices, supply chain conditions, input/output inflation, and upcoming manufacturing and services data. (arl)
Source: newsmaker.id
