S&P Global's preliminary data for April indicates U.S. business activity resumed growth after a near-stall in March, but the improvement comes alongside a notable deterioration in supplier delivery times and a sharp rise in prices for goods and services.
The flash U.S. Composite PMI Output Index - which combines measures of manufacturing and services activity - climbed to 52.0 in April from 50.3 in March. Readings above 50 denote expansion in private-sector output; the March reading had been the weakest since September 2023.
"A rebound in business output growth in April is good news after the near-stagnation seen in March, but over the past three months we have seen the weakest expansion of output recorded since the start of 2024 with the war in the Middle East squarely to blame," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Most of the month-on-month improvement was concentrated in manufacturing, where S&P Global said firms were rebuilding inventories amid concerns about supply availability and rising prices. The manufacturing PMI rose to 54.0 in April from 52.3 in March, a 47-month high for the series.
New orders for factories also strengthened, with the survey's new orders component increasing to 54.8 from 52.3 in March. The services sector, which represents the bulk of U.S. economic activity, bounced back as well: the services PMI returned to expansion at 51.3 in April after a 49.8 reading in March, which had registered as the first contraction since January 2023.
Despite the pickup in activity, S&P Global highlighted growing inflationary pressure linked to supply-chain bottlenecks. Its output price index rose to 59.9 in April from 58.1 in March - the highest reading since July 2022 - a rise the firm attributed largely to delivery delays from the conflict in the Middle East.
The survey also signaled strains on supplier timelines. Factory delivery times lengthened to their slowest pace since August 2022, reflecting both shipping disruption connected to the Iran-related fighting and shortages arising from increased precautionary stockpiling by buyers.
Input cost pressures were pronounced. The prices-paid gauge - which measures costs businesses face for inputs - climbed to an 11-month peak of 62.6 in April from 60.9 in March. S&P Global said that the combination of shortages and surging input costs saw average prices charged for goods and services rise in April at the fastest rate since July 2022.
S&P Global linked many of the disruptions to the U.S.-Israel conflict with Iran, saying the fighting has interfered with shipping through the Strait of Hormuz and pushed up costs for oil and other commodities, including fertilizers, petrochemicals, and aluminum. The firm also noted that supplier pressures predated the conflict, pointing to strains from wide-ranging tariffs implemented by President Donald Trump.
The report stated that Tehran effectively closed the Strait of Hormuz after U.S.-Israeli strikes on Iran began on February 28. It added that on Tuesday, President Donald Trump indefinitely extended the ceasefire with Iran, but that the U.S. Navy blockade of Iranian ports remains in place.
Taken together, the flash PMI suggests a U.S. private sector that has returned to modest growth in April, led by manufacturing restocking, but facing rising cost pressures driven by geopolitical-driven shipping disruption and elevated input costs.
Key points
- Composite PMI rose to 52.0 in April from 50.3 in March, signaling renewed private-sector expansion.
- Manufacturing led the improvement - manufacturing PMI increased to 54.0 and new factory orders jumped to 54.8.
- Supply-chain disruptions tied to the Iran conflict lengthened delivery times and pushed input and output prices to multiyear highs.
Risks and uncertainties
- Ongoing shipping disruption through the Strait of Hormuz may continue to elevate costs for energy and commodity-intensive sectors such as petrochemicals, fertilizers, and aluminum.
- Prolonged supplier delays and input shortages could intensify inflationary pressures, affecting pricing across manufacturing and services and potentially squeezing margins for producers.
- Policy and geopolitical actions - including the U.S. Navy blockade of Iranian ports and shifts in the ceasefire status - create uncertainty for global trade flows and input availability.