The Institute for Supply
Management‘s (ISM) monthly sentiment survey for March 2022 reflected a slightly smaller
proportion of U.S. manufacturers reporting expansion. The
The services sector -- which accounts for 80% of the economy and 90% of employment – advanced further in March (+1.8PP, to 58.3%). Inventory sentiment (-15.1PP), exports (+8.0PP), and imports (-6.7PP) saw the largest changes. Input prices again pushed higher (+0.7PP).
Of
the industries we track, Wood Products and Ag & Forestry contracted, while the
rest expanded. Respondent comments included the following:
Construction. “Pricing pressures are stronger than ever due to the
Russia-Ukraine [war], and energy costs are skyrocketing.”
IHS Markit‘s
survey headline results were mixed relative to their ISM counterparts -- manufacturing:
ISM decelerated while Markit accelerated; services: both rose.
Manufacturing. Output growth accelerates to fastest in seven months
as supply disruption eases.
Key findings:
*
Production and new orders rise steeply
* Smallest deterioration in vendor performance for 14 months
* Cost pressures gain renewed momentum
Services. Business activity growth quickens amid stronger
demand conditions, but charge inflation reaches series high.
Key findings:
*
New business expansion accelerates to fastest since June 2021
* Selling prices rise at sharpest pace on record
* Backlogs of work grow at series-record rate
Commentary
by Chris Williamson, Markit’s chief business economist:
Manufacturing. “US manufacturing growth accelerated in March as
strong demand and improving prospects countered the headwinds of soaring cost
pressures and the Russia-Ukraine war.
“Order
book growth has picked up as customers look to the further reopening of the
domestic and global economies amid signs that the disruptions from the pandemic
continue to fade.
“While
companies continued to report widespread production constraints due to supply
chain bottlenecks, the incidence of such delays is now lower than at any time
since January 2021. Jobs growth has also improved as fewer companies reported
labor shortages.
“Similarly,
although price pressures remain elevated, with surging energy costs pushing
firms’ costs higher at an increased rate in March, rates of inflation of both
input costs and average selling prices have fallen from the record highs seen
late last year to hint that consumer price inflation could likewise soon peak.
“It
was especially encouraging to see business optimism about the year ahead
improve further in March, despite the new uncertainties, sanctions and
geopolitical risks caused by the Ukraine invasion, with optimism among
producers now the brightest since late-2020.”
Services. “Business activity in the vast service sector
enjoyed a boost from the relaxation of virus-fighting restrictions in March,
regaining strong momentum after the Omicron-induced slowdown seen at the start
of the year. Demand for services is in fact growing so fast that companies are
increasingly struggling to keep pace with customer orders, leading to the
largest rise in backlogs of work recorded since the survey began in 2009.
"However,
while this suggests that companies have a healthy book of orders to sustain
strong output in the coming months, the downside is further upward pressure on
prices as demand exceeds supply. With firms' costs inflated by the soaring
price of energy, fuel and other raw materials, as well as rising wages, prices
charged for services are rising at an unprecedented rate. Consumer price
inflation therefore looks likely to accelerate further as we head into the
spring."
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.
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