Inflationary pressures soared in April for both manufacturers and services sector businesses, hurting business confidence and the willingness of consumers to spend, according to survey results released Monday.
The S&P flash services index tumbled in April to a three-month low of 54.7 from 58.0. That missed expectations for a reading of 57.9.
The flash manufacturing index rose to a seven-month high of 59.7 from 58.5. That was better the forecast of 58.1.
The flash composite index fell to 55.1 from last month’s 57.7, a three-month low. Economists had forecast 57.5, so this number was a downside surprise.
The pace of expansion of new orders in the services sector slowed to a three-month low. Businesses reported labor and supply shortages as a drag on growth. As well, inflation dampened customer willingness to spend money, according to the report.
Services sector businesses reported the fastest growth in cost burdens since data collection began in 2009. Goods producers reported the sharpest rise since the record pace recorded in November 2021.
The purchasing manager indexes or PMIs come from surveys of senior executives in charge of buying supplies for their companies. The surveys have been rebranded after S&P Global acquired IHS Markit.
There are also signs that supply chain problems are once again worsening.
“Materials shortage also hampered firms ability to clear work outstanding, with suppliers delivery times lengthening in April at an increased rate,” S&P Global reported.
Business confidence dipped to a six-month low but remains in positive territory, the report said.
“Softer expectations were broad-based, as firms highlighted concerns regarding spiraling costs and evidence of less robust demand conditions, due in part to higher selling prices,” S&P said.
“Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints,” said Chris Williamson, chief business economist at S&P Global.
The jump in prices and costs in both services and manufacturing is the latest sign that inflationary pressures may not be abating and inflation may not have peaked in March. The record cost pressure in services demonstrates that claims that inflation is being caused primary by supply chain shortages are likely wrong. Similarly, this means that inflation should not be expected to significantly wane as demand rebalances from goods to services.