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US Business Activity Accelerates in October. Supply Constraints Hampers Factories

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US business activity expanded solidly in October, indicating economic growth rose at the start of Q4 as labor and raw material shortages slowed down manufacturing.

Source: IHS Markit

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IHS Markit’s flash US Composite PMI Output Index, which measures the manufacturing and services sectors, bounced back to a reading of 57.3 in the first half of this month from 55.0 in September. An index score above 50 indicates growth in the private sector.

A resurgence in COVID-19 infections affected demand for services in consumer-facing businesses like hotels, restaurants, and air travel. Alongside shortages across all industries, the newer infections hampered economic activity.

The improvement in business activity this month was attributable to the services sector. The IHS Markit survey’s flash services sector PMI rebounded to 58.2 from 54.9 in September.

Raw materials shortages hampered manufacturing activity in the month. The flash manufacturing PMI dropped to a seven-month low of 59.2 from 60.7 in September.

Factory production increased at its slowest rate since July 2020. Manufacturers in the US reported higher costs for inputs and were passing costs to consumers, a move that could keep inflation high for a while.

 

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