Inflation Nation: Businesses Say Prices Rising at ‘Unprecedented Rate’

President Joe Biden delivers remarks about the Colonial Pipeline hack, in the Roosevelt Room of the White House, Thursday, May 13, 2021, in Washington. (AP Photo/Evan Vucci)
AP Photo/Evan Vucci

Strong economic growth in the services and manufacturing sector is pushing prices up at an “unprecedented rate,” surveys of executives in both the manufacturing and services sector indicated Friday.

The flash reading of the IHS Market U.S. composite purchasing managers index unexpectedly jumped to a record high 68.1 in May from 63.5 in April, according to survey data released Friday. Analysts had expected the index to move sideways or slightly downward after hitting records in April.

The manufacturing component went from record high to new record high. The services portion was expected to see a modest gain after a stunning upward leap in April. Instead, it exploded higher again, rocketing from a score of 64.7 to 70.1.

“Growth was driven by the fastest service sector upturn on record,” said Chris Williamson, the chief economist for IHS Market.

But all this growth coming amid supply-chain chaos and shortages is also spurring inflation.

“The May survey also brings further concerns in relation to inflation, however, as the growth surge continued to result in ever-higher prices growth surge continued to result in ever-higher prices. Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months,”

Another inflationary signal from the report came in the form of reports from manufacturers noting higher order volumes from clients due to material shortages and efforts to stockpile amid rising costs.

Any reading in the IHS PMI indexes above 50 indicates improving conditions. The flash estimate is based on responses from around 85 to 90 percent of total survey responses each month.

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