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U.S. Business Activity Bounces Back While Inflation Intensifies


© Reuters.

(Bloomberg) — U.S. business activity bounced back in early February from an 18-month low as a decline in Covid-19 cases rejuvenated demand, while inflationary pressures intensified.

The IHS Markit flash composite purchasing managers index advanced 4.9 points to 56, the group reported Tuesday. In January, the measure faltered as the omicron variant restrained activities and exacerbated worker shortages. Readings above 50 indicate growth.

The report showed firms are passing on higher materials, transportation and labor costs. A measure of prices charged for goods and services rose to the highest in data back to 2009, illustrating persistent supply and demand imbalances brought on by the pandemic.

“With growth rebounding sharply amid resurgent demand, and price pressures rising again to an all-time high, the survey will add to expectations of a more aggressive policy tightening” by the Federal Reserve, Chris Williamson, chief business economist at IHS Markit, said in a statement.

The group’s gauge of services led the February rebound in the composite measure with a 5.5-point gain on expanding inflows of new business and stronger employment. The manufacturing index rose two points, reflecting firmer production, employment and orders growth.

The composite index, which dates back to 2009, peaked at a reading of 68.7 last spring on strong pent-up demand among pandemic-weary consumers, but lost some momentum in subsequent months as new strains of the coronavirus and supply-side challenges disrupted business operations.

The February figures — including a measure of future output hitting a 15-month high — support economists’ projections the economy will find stronger footing after the omicron-related hit to first-quarter growth.

In a sign that transportation bottlenecks may be ameliorating somewhat, a measure of supplier deliveries at U.S. factories improved to a nine-month high. Still, shipping delays remain a challenge.

©2022 Bloomberg L.P.

U.S. Business Activity Bounces Back While Inflation Intensifies

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