-- The US manufacturing sector saw continued growth in April, though inflationary pressures intensified amid disruptions caused by the Middle East conflict, two surveys showed Friday.
The Institute for Supply Management's purchasing managers' index remained unchanged sequentially at 52.7 last month. The consensus was for a 53.2 reading in a survey compiled by Bloomberg. A reading above 50 indicates the manufacturing sector is generally expanding.
"The April ISM report suggests the US manufacturing sector's recent rebound may be leveling off, underlining a still-fragile expansion," TD Economics Senior Economist Vikram Rai said in a note. "Stable headline PMI and a diminished production index highlight cooling momentum, even as new orders growth persists."
The new orders index increased to 54.1 from 53.5 sequentially in April, while production dropped to 53.4 from 55.1. The employment measure retreated to 46.4 from 48.7, remaining in contraction for the 31st consecutive month. The prices gauge jumped to 84.6 from 78.3, marking its highest reading since April 2022 and rising about 26 percentage points in the past three months, the ISM survey showed.
"The prices-paid index's steep climb to multiyear highs -- alongside the conspicuous slowdown in supplier deliveries -- signals mounting supply-chain stress and inflationary pressures driven by surging energy prices and war-related disruptions," Rai said. "These resurgent price pressures are keeping the Federal Reserve on alert, supporting expectations that any additional monetary policy easing is unlikely in the near term."
Earlier in the week, the Fed kept its benchmark lending rate steady for a third straight meeting, saying the Middle East conflict is fueling uncertainty around the US economic outlook.
Separately, S&P Global (SPGI) said Friday its manufacturing PMI advanced to 54.5 last month from 52.3 in March, representing the "strongest" expansion in the manufacturing economy since May 2022. However, input and output prices increased at accelerated rates, with inflation in each component "the steepest" for 10 months, the data provider said.
"A key driving force behind the upturn is the need for companies to get ahead of further feared price rises and supply shortages, providing a short-term boost that could fade in the coming months as headwinds to the economy continue to build," S&P Global Market Intelligence Chief Business Economist Chris Williamson said.
"Growth of purchasing activity hit a rate not seen for four years, since the pandemic, amid increasingly widespread supply delays and price rises commonly linked to the war in the Middle East, which has exacerbated existing pressure on supply and inflation from tariffs," Williamson said.
Energy prices have surged as the US-Israel war with Iran has curtailed shipments through the crucial Strait of Hormuz. The war, which started at the end of February, paused following a recent ceasefire between Washington and Tehran, but a framework for a permanent truce is yet to be reached.
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