By Xavier Fontdegloria

 

U.S. private sector business activity continued to expand at a solid pace in June amid boosted new orders, but the rate of growth softened compared with the record-high registered in May.

The flash reading for the U.S. Composite Output Index decreased to 63.9 in June from 68.7 in May, according to preliminary data from IHS Markit released Wednesday.

The indicator is based on data from the firm's PMI surveys for manufacturing and service sectors. In June, both the manufacturing and services sector expansion moderated amid difficulties to hire staff and supplier delays.

"While both output growth and inflows of new orders have come off their peaks in both manufacturing and services, this is as much due to capacity constraints limiting firms' abilities to cope with demand rather than any cooling of the economy," said Chris Williamson, chief business economist at IHS Markit.

IHS Markit's flash U.S. Services Business Activity Index was 64.8 in June, down from 70.4 in May. Economists polled by The Wall Street Journal expected the indicator to come in at 70.0.

Service sector activity was supported by a further significant rise in new business as Covid-19 restrictions were relaxed further, although slower than that seen in May. Struggles among companies to find suitable workers hampered employment growth, the report said.

The IHS Markit Flash Manufacturing PMI climbed to 62.6 in June from 62.1 in May, beating economists expectations of a fall to 61.5 and a new series record high.

Rates of output and new order growth remained above the series average, but the softer rise in production was linked to supplier delays and difficulties finding workers.

Average supplier delivery times for goods producers lengthened to the greatest extent on record, IHS Markit said.

Price pressures remained elevated in June for both manufacturers and service providers, and higher costs were passed on to customers.

"While the second quarter will likely represent a peaking in the pace of economic growth, a concomitant peaking of inflation is far less assured," Mr. Williamson said.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

 

(END) Dow Jones Newswires

June 23, 2021 10:20 ET (14:20 GMT)

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