The Institute for Supply
Management‘s (ISM) monthly sentiment survey for April 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 -- declined in April (-1.2PP, to 57.1%). Imports (+7.9PP), inventory sentiment (+6.5PP) and new orders (-5.5PP) saw the largest changes. Input prices again pushed higher (+0.8PP).
All
industries we track expanded. Respondent comments included the following:
Construction. “Mortgage rates have skyrocketed. While relatively
low from a historical perspective, the new rates -- combined with historically
high home prices -- will temper new home demand at some point over the next 12
months.”
IHS Markit‘s survey headline results were mixed relative to their ISM counterparts -- manufacturing: ISM fell while Markit rose; services: both ISM and Markit retreated.
Manufacturing. April PMI rises to seven-month high amid stronger
demand, despite sharper price increases.
Key findings:
*
Output growth quickens to fastest for nine months
* Inflationary pressures strengthen
* Stocks of purchases rise at series-record rate
Services. Sharp upturn in business activity, but inflationary
pressures strengthen to record high.
Key findings:
*
Output and new orders rise steeply despite growth easing
* Input costs and output charges increase at record paces
* Rate of job creation accelerates to strongest for a year
Commentary
by Chris Williamson, Markit’s chief business economist:
Manufacturing. “After a slow start to the year, which saw
production growth almost stall, the manufacturing sector is starting the second
quarter on a much stronger footing. Demand from consumers and businesses is
proving encouragingly robust despite severe inflationary pressures, which
intensified further during April.
“Both
input cost and selling price inflation surged higher, the latter accelerating
to a near-record rate, as firms faced rising energy prices, ongoing
supplier-driven price hikes amid strained supply chains, and rising wage costs.
“In
short, while the survey data add to indications that the pace of economic
growth will improve in the second quarter after a lackluster first quarter, the
less welcome news is that elevated inflationary pressures show no signs of
relenting.”
Services. “Alongside the acceleration in manufacturing growth
recorded by the S&P Global PMI in April, the sustained solid performance of
the service sector points to GDP growth returning in the second quarter.
“Although
the service sector lost some momentum in April, this merely reflects payback
from the surge in spending seen at the end of the first quarter, when
Omicron-related virus containment measures were eased.
“It’s
clear that growth could be even stronger if activity was not still being
constrained by supply chain bottlenecks and labor availability issues. Domestic
demand remains buoyant among both households and businesses in spite of current
inflationary pressures, and exports are being boosted by pent-up pandemic
demand as global travel restrictions are eased. Exports of services grew in
April at the fastest rate since data were first collected in 2014.
“The
consequence of demand running ahead of supply is higher prices, with average
charges levied for services rising at a sharply increased and unprecedented
rate in April following a record increase in firms’ costs. Enjoying strong
demand, firms were increasingly able to pass on higher energy, materials and
staff costs to customers, indicating an economy that continues to run hot.”
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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