U.S. business activity firmed in April, but the cleaner signal in the latest survey is that inflation pressure is worsening faster than growth is improving. S&P Global’s flash composite PMI rose to 52.0 from 50.3 in March, a recovery from near-stall territory, while the index of output prices climbed to 59.9, its highest since July 2022.
The rebound was broad enough to include both manufacturing and services, but the manufacturing side led the gains. Factories saw new orders jump and companies said they were building stock because of worries about supply availability and price hikes, while service-sector activity moved back above 50 after contracting in March. In practice, that means the economy is still growing, just not fast enough to offset the strain building in prices and supply chains.
The source of that strain is the Middle East conflict, which has disrupted shipping through the Strait of Hormuz and pushed up oil and other commodity costs, including fertilizers, petrochemicals and aluminum. S&P Global said factory delivery times were the longest since August 2022, with shortages aggravated by safety-stock buying, and businesses’ input costs rose to an 11-month high.
That leaves the Federal Reserve in a tougher spot. The surveys suggest firms are already raising selling prices at the fastest pace since July 2022, even as employment barely grew, a mix that points to sticky inflation and only modest demand underneath it.
