Inflationary pressures are mounting in the manufacturing sector even as the growth of the U.S. economy slowed in April after a brisk first quarter, a pair of key business surveys indicated Tuesday.
The “flash” purchasing managers surveys from S&P Global showed that input prices continued to rise sharply in April, although the pace of inflation eased from the ten-month high hit in March. Manufacturers saw the fastest rise in input costs in a year thanks to rising prices of raw materials.
Services providers reported the slowest rise in overall costs in three years, according to S&P Global, although shipping and staffing costs continued to increase.
“Notably, the drivers of inflation have changed. Manufacturing has now registered the steeper rate of price increases in three of the past four months, with factory cost pressures intensifying in April amid higher raw material and fuel prices, contrasting with the wagerelated services-led price pressures seen throughout much of 2023,” said Chris Williamson, Chief Business
Economist at S&P Global Market Intelligence.
While prices charged by businesses increased at a solid rate in April, reflecting the higher input costs, the pace of inflation was lower than the 10-month high hit in March.
Overall business activity slowed in April, the surveys indicated. The flash manufacturing purchasing managers index tumbled to a four-month low of 49.9 in April from 51.9 in March. The flash services PMI slipped to a five-month low of 50.9 from 51.7 in March.
“The US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April. Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened
concern about the outlook,” Williamson said.
Signs of weaker demand weight on hiring plans, with some businesses saying they held off on filling positions left vacant by exiting employees. As a result, employment decreased for the first time since June 2020.
The contraction in employment was driven by the services side of the economy, where employment fell by the most since mid-2020. Excluding the early pandemic period, which saw unprecedented mass layoffs, this was the biggest contraction since 2009.
Manufacturing employment, however, continued to increase steadily.
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