Business Activity Softens Even as Supply Snags Ease

An employee wearing a protective mask operates a forklift to transport parts at a manufacturing facility in Shelby Township, Mich. (Emily Elconin/Bloomberg)

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Growth in U.S. business activity cooled to a still-solid pace in early December, while cost pressures intensified for service providers and eased somewhat for manufacturers.

The IHS Markit flash December composite purchasing managers index slipped 0.3 point to a three-month low of 56.9, the group reported Dec. 16. Readings above 50 indicate growth. The group’s gauge of manufacturing dropped to the lowest level of the year, while the services index fell to a three-month low.

The factory survey, however, showed production expanded at a faster pace while a measure of input costs fell by the most since April 2020. For service providers, costs grew at the fastest pace in data back to 2009, and the index of prices received ticked up to the second highest on record.



“Manufacturing output growth even picked up slightly amid a marked easing in the number of supply chain delays, which also helped to take pressure off raw material prices,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

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Still, “the worry is that rising wage growth, greater transport costs and higher energy prices have pushed service sector cost inflation to a new high,” Williamson said.

In a sign that supply chain constraints may be easing, the IHS Markit index of supplier deliveries at U.S. factories improved to a seven-month high. Still, delivery times remain lengthy.

Meanwhile, employment growth at services was the slowest in three months, indicating labor and material constraints continue to dog the industries that make up the lion’s share of the economy.

The report indicates firmer activity in the U.S. compared with Europe. Separate figures from IHS Markit showed a composite measure in the euro area dropped to 53.4 this month from 55.4. Services activity was the slowest since April amid rising coronavirus cases.

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