U.S. private sector businesses registered a further marked expansion in activity during June, as further easings of COVID-19 restrictions boosted new orders. The rate of expansion softened slightly from the high seen in May, but remained substantial overall.
Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 63.9 in June, down from 68.7 in May, but nonetheless signalling a historically elevated rate of expansion in output across the private sector. Moderations in activity growth were seen in both the manufacturing and service sectors, with goods producers hampered in particular by significant supplier delays and both sectors reporting difficulties finding staff.
New business growth remained marked during June, despite easing to a three-month low. The rise in new orders was substantial among manufacturers and service providers alike, as COVID-19 restrictions were relaxed further and client demand remained buoyant At the same time,
firms reported another strong monthly upturn in new export orders amid looser containment measures in key export markets.
Price pressures also remained elevated in June. The rate of input price inflation softened slightly but was the second-fastest on record. Manufacturers continued to note rapid increases in raw material and fuel costs, whilst service providers highlighted higher wage bills to attract workers plus greater transportation fees and fuel costs.
Higher costs were commonly passed on to clients through a steep rise in output charges during June. The increase in selling prices was the second-sharpest since data collection began in October 2009. Employment issues remained prevalent during June, as numerous panellists mentioned difficulties finding suitably trained candidates for current vacancies. Although the rate of job creation remained strong overall, growth in backlogs of work was also among the highest seen over the past decade.
Business confidence ticked higher in June, as firms remained broadly upbeat regarding the outlook for output over the coming 12 months. Optimism was widely linked to strong client demand and the further reopening of the economy following mass vaccination.
IHS Markit Flash U.S. Services PMI™ The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index registered 64.8 in June, down from May’s series record of 70.4. The marked expansion was the second-sharpest since data collection began in
October 2009, and reportedly due to further upturns in customer demand as pandemic conditions eased further during the month.
Service sector activity was supported by a further significant rise in new business. Although slower than that seen in May, the rate of growth was among the quickest in the series history and was linked to robust demand conditions. New export order growth likewise remained strong, with some firms attributing this to looser travel restrictions.
Meanwhile, struggles among companies to find suitable workers hampered employment growth in June. Although strong, the rate of job creation was the slowest for three months. Pressure on capacity was reflected in a solid rise in backlogs of work.
At the same time, inflationary pressures remained elevated in June. Service providers stated that wage costs and additional transportation fees pushed up cost burdens, which rose at the second-fastest pace on record. Similarly, output prices increase markedly as firms sought to pass on
greater input costs to clients.
Service sector businesses registered a slight moderation in the degree of optimism in June, with some concerned about the impact of rising inflation over the coming months.
IHS Markit Flash U.S. Manufacturing PMI™ June data signalled the greatest improvement in operating conditions among goods producers on record, as highlighted by the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posting 62.6, up from 62.1 in May.
Rates of output and new order growth remained well above their respective series averages. However, there were reports that the softer rise in production among manufacturers was linked in part to supplier delays and difficulties finding suitable workers.
Average supplier delivery times lengthened to the greatest extent on record by some margin. Despite a substantial rise in backlogs of work, employment growth slowed in June as firms struggled to find staff or entice workers back to employment.
Amid worsening vendor performance, input prices soared once again at the end of the second quarter. The rate of input cost inflation accelerated to a fresh series record amid broad-based raw material price hikes. Firms raised their selling prices at a quicker rate in an effort to pass on these higher costs, with charge inflation also surpassing all previous records.
Unlike their service sector counterparts, goods producers expressed a greater degree of confidence in future output during June. Firms reportedly hope that an end to restrictions and further increases in customer demand will boost output over the next year.
