U.S. business activity rises to five-year high; inflation pressures build

U.S. business activity rises to five-year high; inflation pressures build LUCIA MUTIKANI WASHINGTON REUTERS PUBLISHED 29 MINUTES AGO Open this photo in gallery: An employee works on a Chevrolet Volt at a General Motors plant in Hamtramck, Mich., in 2018. PAUL SANCYA/THE ASSOCIATED PRESS COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. U.S. business activity raced to a more than five-year high in September, fuelled by a surge in new orders, though strong demand strained supply chains and pushed prices higher. S&P Global said on Wednesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 58.4 this month. That was the highest level since July, 2021, and followed a reading of 56.0 in August. A reading above 50 indicates expansion in the private sector. The rise in the PMI reflected strong gains in both the services and manufacturing sectors. The PMI was consistent with the economy growing at around a 5-per-cent annualized rate, S&P Global said. It also noted a sharp rise in work backlogs and supply chain delays, “pointing to a lack of operating capacity which fed through to higher prices.” The Atlanta Federal Reserve’s gross domestic product tracking estimate is running at a 5.1-per-cent rate. The economy grew at a 1.5-per-cent pace in the April-June quarter. “Business is clearly booming now in both manufacturing and services,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “However, this growth is being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded.” The supply constraints mostly stem from the U.S.-Israeli war with Iran, now in its seventh month. Strong demand adding to inflation Chicago Fed President Austan Goolsbee said on Monday supply shocks were proving more persistent, adding there was evidence that strong demand was now adding to the problem. That view was supported by the findings of the S&P Global survey. The survey’s measure of new orders received by businesses raced to 58.2, the highest reading since March, 2022, from 55.2 in August. The increase was across both services and manufacturing industries. Incomplete orders, a key indicator of capacity utilization and future business growth, increased to the highest level since May, 2022. Though companies across…