Growth of private sector output in the U.S. gained considerable momentum in February as companies reported a notable recovery in demand from COVID-related disruptions at the start of the year.
Services firms led the rise, although manufacturers likewise registered a stronger increase in output, buoyed by a slight easing of supply bottlenecks.
However, February also saw a survey record rise in average prices charged for goods and services.
Rising from an 18-month low of 51.1 in January to 56.0 in February, the seasonally adjusted IHS Markit Flash US Composite PMI Output Index indicated a substantial expansion in private sector output that outpaced the long-run series average.
Both the manufacturing and service sectors recorded stronger expansions in output, with companies linking growth to substantial gains in new business, employees returning from sick leave, increased travelling and greater availability of raw materials.
February data highlighted a sharp and accelerated increase in new business among private sector companies that was the fastest in seven months.
Firms mentioned that sales were boosted by the retreat of the pandemic, improved underlying demand, expanded client bases, aggressive marketing campaigns and new partnerships.
Customers reportedly made additional purchases to avoid future price hikes.
Quicker increases in sales were evident among both manufacturers and service providers.
Inflationary pressures across the private sector intensified in February, with the rate of input price inflation quickening from January’s ten-month low.
Panellists continued to indicate higher raw material, transportation and wage costs.
Global shortages of raw materials and lingering supply-chain disruptions were again cited, albeit less so than in prior months.
Prices charged for goods and services in the US rose at a record pace in February as companies continued to share additional cost burdens with their clients.
Manufacturers signalled a sharper increase in selling prices than service providers, though the latter reported a record rise.
Private sector employment expanded further in February, taking the current sequence of job creation to 20 months.
Moreover, the increase was marked and the strongest since last May.
Anecdotal evidence indicated that hiring activity stemmed from sustained gains in new work and an associated rise in output requirements.
Goods producers posted a moderate expansion in staff numbers, while jobs growth quickened to a nine-month high among services firms.
At 56.7 in February, up from 51.2 in January, the seasonally adjusted IHS Markit Flash US Services PMIâ„¢ Business Activity Index highlighted a substantial and accelerated upturn in output.
Boosting the latest rise in business activity was a quicker increase in new work intakes.
Companies noted the strongest expansion in sales since last July.
International demand for US services also strengthened in February.
With demand conditions improving, service providers continued to hire extra staff.
The increase was marked and the fastest in nine months.
On the price front, there were sharper increases in both input costs and output prices.
Notably, the rate of charge inflation hit a series peak.
The IHS Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI ™) 1 rose from 55.5 in January to 57.5 in February, signalling a stronger improvement in business conditions across the sector.
Although the Suppliers’ Delivery Times Index continued to inflate the PMI, the latest reading was also boosted by stronger increases in output and new orders.
Production rose at a quicker rate in February, albeit one that was moderate relative to those registered in 2021.
Anecdotal evidence indicated that growth was hampered by raw material scarcity, supplychain disruptions and labour shortages.
Factory orders increased at a sharp and accelerated pace in February, prompting firms to resume their hiring efforts after a blip in January.
Export sales likewise expanded, with growth hitting a five-month high.
In contrast to the trend seen in the service sector, input cost inflation among manufacturers eased to a nine-month low midway through the quarter.
That said, the rate of inflation remained elevated and outpaced that seen for services.
Additional cost burdens continued to be transferred to clients, as evidenced by another increase in factory gate charges.
The rate of output price inflation was sharp and the fastest in three months.
Finally, manufacturers continued to purchase additional inputs for use in the production process, with the rate of input buying growth improving to a five-month high.
Suppliers’ delivery times meanwhile lengthened to the least extent since last May.
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said: “The pace of economic growth accelerated sharply in February as virus containment measures, tightened to fight the Omicron wave, were scaled back.
"Demand was reported to have revived and supply constraints, both in terms of component availability and staff shortages, moderated." ■