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  • U.S. private sector business activity continues to expand in October - IHS Markit's survey
Ekonomické zprávy
22.10.2021

U.S. private sector business activity continues to expand in October - IHS Markit's survey

Preliminary data released by IHS Markit on Friday revealed that U.S. private sector business activity continued to grow in early October, despite bottlenecks as services rebound from the Delta wave.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 59.2 in October, down from 60.7 in September. The latest reading pointed to the slowest expansion in factory activity since March, albeit one that was among the strongest on record and sharp overall. Economists had expected the reading to slip to 60.3. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. Factory output increased only modestly, with the pace of growth the slowest since July 2020 as it continued to be hampered by supply chain issues and shortages. In addition, there was a record lengthening of suppliers' delivery times. The rate of increase in new orders weakened to the slowest for eight months, but remained solid overall, supported by strong client demand. On the price front, input costs saw a further rise in October, which allowed them to surpass August’s record to reach a fresh series high. Factory gate charges also increased at the fastest pace in the series history as firms continued to pass greater cost burdens through to clients.

The Markit flash services purchasing manager's index (PMI) rose to 58.2 in October, up from 54.9 in the previous month. This was the highest reading since July. Economists had expected the reading to increase to 55.1. Driving gain in October was the fastest rise in inflows of new work since July, which was commonly attributed to stronger demand conditions as COVID-19 worries eased during the month. In addition, employment increased at the quickest rate since June, although some companies reported issues finding candidates and filling open positions. On the price front, the rate of input price inflation accelerated to the second-fastest on record, while the rate of increase of output charges hit an all-time high.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 57.3 in October, up from 55.0 in September. This was the highest reading since July.

“October saw resurgent service sector activity as COVID-19 case numbers continued to fall, marking an encouragingly strong start to the fourth quarter for the economy,” noted Chris Williamson, Chief Business Economist at HIS Markit. “Hiring has likewise picked up as firms have been encouraged to expand capacity to meet rising demand. However, while manufacturers also continue to report strong demand, factory production remains plagued by constraints, including record supply chain bottlenecks and labor shortages. Prices paid by factories for raw materials rose at yet another new record pace as a result, in turn feeding through to both higher prices at the factory gate and spilling over into higher service sector prices. Higher wages are also having to be offered to attract or retain staff, adding to the inflationary pressures.”

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