U.S business activity plummet owing to supply shortages and delta variant: IHS Markit survey

The U.S. business activity has lost momentum in August as the supply shortages and concerns over the fast-growing contagious delta variant of coronavirus weakened the economy for future development.

The manufacturing and services industry tracker, Flash U.S. Composite PMI (Purchasing Managers’ Index) Output Index fell to a low of 55.4 in August from 59.9 in the previous month, data firm IHS Markit said on Monday.

A reading above 50 indicates growth in the private sector.

Private sector firms around the U.S. have signaled a continued robust rise in business in August, although the growth rate dropped down to a low of eight months. The output expansion weighed capacity pressures, the material scarcity, and the Delta spread.

“Not only have supply chain delays hit a new survey record high, but the August survey saw increasing frustrations in relation to hiring,” said Chris Williamson, Chief Business Economist at IHS Markit. Jobs growth waned to the lowest since July of last year as companies either failed to find suitable staff or existing workers switched jobs.”

The seasonally adjusted Flash U.S. Services PMI Business Activity Index saw the weakest increase of production since December 2020 at 55.2 from 59.9 in July while Reuters' economists had predicted a 59.5 reading.

“Prices look set to continue to rise sharply due to the persistent upward pressure on costs arising from shortages of materials and labor, though if demand continues to cool due to rising case numbers this should alleviate some of the inflationary pressures,” Williamson said.

Data from the Flash U.S. Manufacturing PMI reported another sharp rise in production health, but it was 61.2 in half through the third quarter, however, it fell from 63.4 in July. Operation improvements for four months were the slowest, but considerable.

The price measurements by IHS Markit paid by service providers and manufacturers have increased, and the factory input prices have reached a new high record.

The results of the study are intertwined with a rising perception that the speed of economic expansion, which is not seen since the 1980s and is driven by significant fiscal stimulus is declining following two straight quarters of economic growth above 6 percent, Reuters reported.

Picture Credits: NBC News