A pair of new surveys of the economy show the U.S. is still expanding at a rapid pace, but ongoing labor and supply shortages are still acting as a drag on growth.
Business leaders at U.S. manufacturing and service-oriented companies are still optimistic about the near future, a new poll showed. Yet the inability to find enough people to hire or to get badly needed supplies on time continued to pose a major roadblock.
The so-called flash reading of IHS Markit’s U.S. services index slid 1.1 points to a 14-month low of 54.4 in September.
The firm’s manufacturing index also dipped to a five-month low of 60.5 from 61.1.
Put in perspective, though, these are still very healthy numbers. Any thing above 50% signifies growth and numbers above 60% are exceptional.
Service-style companies such as restaurants, hotels and theaters were partly hurt by a surge in “delta” coronavirus cases in August and September. More Americans stayed away for fear of catching the virus.
Delta was less of a problem for manufacturers. They struggled to procure supplies on time and maintain high levels of production. And even when they could get all the supplies they needed, many were paying sharply higher prices.
In turn, companies are trying to pass price increases onto customers. They are increasing prices at the fastest pace since IHS Markit began collecting the data in 2007. That’s contributing to a big rise in U.S. inflation.
“The pace of U.S. economic growth cooled further in September,” said chief IHS Markit business economist Chris Williamson, “reflecting a combination of peaking demand, supply chain delays and labor shortages.”
A separate report, meanwhile, showed the economy grew at a robust clip in August. The leading economic index jumped 0.9% last month, the privately run Conference Board said Thursday.
“While the Delta variant—alongside rising inflation fears—could create headwinds for labor markets and the consumer spending outlook in the near term, the trend in the LEI is consistent with robust economic growth in the reminder of the year,” said Ataman Ozyildirim, senior director of economic research at the board.