US manufacturing activity expanded in May by the most in four years as customers strived to get ahead of mounting price pressures tied to the Iran war.
The S&P Global flash May factory purchasing managers index rose 0.8 point to 55.3, data released Thursday showed. Figures above 50 indicate expansion. A gauge of prices paid for inputs jumped more than 11 points to the highest level since June 2022.
The figures show how manufacturing is getting a temporary boost from the conflict, which has upended supply chains and driven energy and other costs sharply higher. A composite measure of business activity that includes services, meanwhile, was unchanged in May.
The data show “only modest growth of business activity as demand was again squeezed by a further spike in prices and jobs were cut as firms worried over rising costs and the economic outlook,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
“On average, over the past three months order book growth has slowed to its weakest for two years, and a boost from precautionary stock building due to concerns over further price hikes and supply delays will not last forever,” Williamson said.
The group’s composite measure of employment contracted at the fastest pace in nearly two years. Service providers reduced headcount at the second-fastest rate since the early months of the pandemic.
Composite gauges of input and output prices advanced to the highest levels since 2022. While the cost of goods showed a notable increase, prices of services also recorded one of the largest advances in the last four years, the report showed.
Supplier delivery times for manufacturers lengthened by the most since mid-2022.
With the Strait of Hormuz effectively closed to shipping of energy and other key manufacturing inputs, inflationary pressures are becoming more pervasive. That’s weighing on prospects for the economy, with the report showing the weakest expectations within the service sector since April of last year.
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