The preliminary S&P Global composite PMI output index for the United States rose to 58.4 points in September, from 56 points in August, recording its highest reading since July 2021, according to data released by the institution on Wednesday.
A reading above 50 points indicates growth in private-sector activity. S&P Global said the latest reading was consistent with annualized economic growth of about 5%, supported by strong gains in the services and manufacturing sectors.
New orders at highest level since March 2022
The new orders index rose to 58.2 points, from 55.2 points in August, its highest level since March 2022, as demand increased in the services and manufacturing sectors. The volume of outstanding orders also rose to its highest level since May 2022, reflecting mounting pressure on companies’ operating capacity.
Manufacturing and services companies increased hiring to handle the backlog of orders, despite a growing number of companies reporting difficulties finding suitable workers.
Supply bottlenecks weigh on companies’ costs
The index measuring prices paid by companies for production inputs jumped to 66.4 points in September, from 59.9 points in August, its highest reading since October 2022. Manufacturing and services companies reported higher input costs, while rising raw-material prices in manufacturing were often linked to supply shortages.
Supplier delivery times lengthened significantly, with supply-chain delays reaching their widest extent since July 2022, while the services sector was most affected by rising prices.
Chris Williamson, chief economist at S&P Global Market Intelligence, said the strength of activity in the manufacturing and services sectors was coinciding with some of the most severe supply-chain bottlenecks recorded in the survey’s nearly two-decade history, apart from the COVID-19 pandemic. He added that order backlogs were giving companies greater pricing power, warning that price pressures could persist in the coming months amid factors including higher diesel prices and freight costs.
Growth estimates and tighter monetary policy
The Atlanta Federal Reserve estimates that gross domestic product will grow at a 5.1% rate, compared with growth of 1.5% in the quarter spanning April through June. The data showed that strong demand was adding to price pressures alongside supply bottlenecks.
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said on Monday that supply shocks had proved more persistent, pointing to signs that strong demand was contributing to intensifying pressures. The Federal Reserve last week raised its overnight benchmark interest rate by 25 basis points to a range of 3.75% to 4%, while signaling that further increases could take place in the coming months.
